Income Tax Act 2007

A 1: Title
This Act is the Income Tax Act 2007. 2004 No 35 s A 1
A 2: Commencement
1 April 2008
1: This Act comes into force on 1 April 2008. Charitable entities
1B: Despite subsection (1), sections CW 41(2) CW 42(1)(b) Act effective for 2008–09 income year and later
2: However, except when the context requires otherwise, this Act applies only with respect to the tax on income derived in the 2008–09 income year and later income years. income year tax 2004 No 35 s A 2 Section A 2(1B) heading inserted 1 April 2008 section 307 Taxation (Business Taxation and Remedial Matters) Act 2007 Section A 2(1B) inserted 1 April 2008 section 307 Taxation (Business Taxation and Remedial Matters) Act 2007
A: Purpose and interpretation
Contents
AA 1: Purpose of Act
The main purposes of this Act are—
a: to define, and impose tax on, a net amount of income
b: to impose obligations concerning tax:
c: to set out rules for calculating tax and for satisfying the obligations imposed. amount income tax 2004 No 35 s AA 1 Section AA 1(a) amended 1 April 2023 section 5(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section AA 1 list of defined terms amount inserted 1 April 2023 section 5(2)(a) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section AA 1 list of defined terms income inserted 1 April 2023 section 5(2)(a) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section AA 1 list of defined terms net income repealed 1 April 2023 section 5(2)(b) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
AA 2: Interpretation
Aids to interpretation
1: Diagrams , examples 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 2 Section AA 2(1) amended 28 October 2021 section 3 Secondary Legislation Act 2021
AA 3: Definitions
Role of Part Y
1: 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 Y Role of Legislation Act 2019, Part 2
2: The Legislation Act 2019 Part 2 person 2004 No 35 s AA 3(2) Section AA 3(2) heading amended 28 October 2021 section 3 Secondary Legislation Act 2021 Section AA 3(2) amended 28 October 2021 section 3 Secondary Legislation Act 2021
AA 4: Crown bound
This Act binds the Crown.
B: Core provisions
Flowchart B1: Outline of Part
BA: Purpose
Contents
BA 1: Purpose
The purposes of this Part are—
a: to impose income tax, provisional tax, withholding liabilities, 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 2004 No 35 s BA 1
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 pay tax taxable income 2004 No 35 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 person liable to pay provisional tax 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 in relation to income tax or ancillary tax subpart BF ancillary tax income tax income tax liability non-filing taxpayer pay provisional tax rules provisional tax return of income tax year 2004 No 35 s BB 2 Section BB 2(5) amended 23 March 2020 section 82(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section BB2 list of defined terms income tax inserted 23 March 2020 section 82(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
BB 3: Overriding effect of certain matters
Tax avoidance arrangements: subpart BG
1: Under Part G Double tax agreements: subpart BH
2: Subpart BH Commissioner double tax agreement income tax tax tax avoidance arrangement 2004 No 35 s BB 3 Section BB 3(2) replaced 1 July 2014 section 5 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
BC: Calculating and satisfying income tax liabilities
Contents
Flowchart B2: Calculating and satisfying income tax liabilities Flowchart B2 amended 7 December 2009 section 4 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
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 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 2004 No 35 s BC 1
BC 2: Annual gross income
A person's annual gross income annual gross income assessable income corresponding income year tax year 2004 No 35 s BC 2
BC 3: Annual total deduction
A person's annual total deduction annual total deduction corresponding income year deduction tax year 2004 No 35 s BC 3
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 Income equal to deductions
2: If, for a tax year, a person's annual gross income equals their annual total deduction, their net income 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 Treatment of net loss
4: A person's net loss for a tax year is included under Part I Part I
a: subtracted from their net income for a future tax year:
b: made available to another person to subtract from that other person's net income for that or a future tax year:
c: used in certain other ways. annual gross income annual total deduction net income net loss tax loss tax year 2004 No 35 s BC 4
BC 5: Taxable income
A person's taxable income Part I available tax loss net income taxable income tax year 2004 No 35 s BC 5 Flowchart B3: Calculating income tax liability Section BC 5 list of defined terms tax loss repealed 30 March 2022 section 47 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
BC 6: Income tax liability of filing taxpayer
Calculation of amount
1: The income tax liability of a filing taxpayer for a tax year is the amount calculated by multiplying their taxable income for the tax year by the basic tax rate. The income tax liability of a filing taxpayer with schedular income is determined under section BC 7 When liability zero or negative
2: If the income tax liability calculated under subsection (1) is zero or negative, the filing taxpayer's income tax liability for the tax year is zero. amount basic tax rate filing taxpayer income tax liability schedular income tax year taxable income 2004 No 35 s BC 6
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 Multiple schedular income
3: If a person has more than 1 kind of schedular income for a tax year, their schedular income tax liability Income tax liability of multi-rate PIEs
4: The income tax liability for a tax year of a multi-rate PIE is determined under subpart HM Special rule for natural person investors in multi-rate PIEs
5: The schedular income tax liability of a natural person who is resident in New Zealand and is an investor , when the rate of tax applied for the year is not equal to the investor’s prescribed investor rate for the year, is calculated section HM 36B amount income income tax liability multi-rate PIE natural person prescribed investor rate resident in New Zealand schedular income schedular income tax liability tax year 2004 No 35 s BC 7 Flowchart B4: Satisfying income tax liability Section BC 7(4) heading added 1 April 2010 section 4(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BC 7(4) added 1 April 2010 section 4(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BC 7(5) heading inserted 1 April 2020 section 83(1) section 83(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section BC 7(5) inserted 1 April 2020 section 83(1) section 83(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section BC 7(5) amended 29 March 2024 section 5(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section BC 7(5) amended 30 March 2021 section 5(1) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section BC 7 list of defined terms multi-rate PIE inserted 1 April 2010 section 4(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BC 7 list of defined terms natural person inserted 29 March 2024 section 5(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section BC 7 list of defined terms prescribed investor rate inserted 30 March 2021 section 5(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section BC 7 list of defined terms resident in New Zealand inserted 29 March 2024 section 5(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Flowchart B4 amended 1 April 2019 section 5 section 3 Taxation (Research and Development Tax Credits) Act 2019
BC 8: Satisfaction of income tax liability
Use of tax credits
1: Credits for tax paid, tax withheld, or other circumstances, calculated under Parts L M Ordering rule
2: The order in which the person uses their credits is set out in section LA 4 Terminal tax
3: If the person's income tax liability is more than the total of their credits, the difference is the person's terminal tax Remaining credits
4: The treatment of any credits remaining after the person's income tax liability is satisfied is dealt with in section LA 5 income tax liability pay tax tax credit tax year terminal tax 2004 No 35 s BC 9
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 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. Non-residents' foreign-sourced income
4: An amount of income of a person is non-residents' foreign-sourced income
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 HC 25(2) Assessable income
5: An amount of income of a person is assessable income
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 2004 No 35 s BD 1
BD 2: Deductions
An amount is a deduction Part D amount deduction 2004 No 35 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 2004 No 35 s BD 3
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 2004 No 35 s BD 4
BE: Withholding liabilities
Contents
BE 1: Withholding liabilities
PAYE income payments
1: A person who makes a PAYE income payment must withhold an amount from the payment under the PAYE rules. Resident passive income
2: A person who makes a payment of resident passive income must withhold an amount from the payment under the RWT rules. Non-resident passive income
3: A person who makes a payment of non-resident passive 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. Employer's superannuation cash contributions
5: A person who makes an employer's superannuation cash contribution must pay ESCT under the ESCT rules. Retirement scheme contributions
5B: A person who makes a retirement scheme contribution to a retirement savings scheme must pay RSCT under the RSCT rules. Residential land purchase amount
6: A person described in section RL 3 amount dividend employer's superannuation cash contribution ESCT ESCT rules FBT rules fringe benefit fringe benefit tax non-resident passive income NRWT rules pay PAYE income payment PAYE rules resident passive income residential land purchase amount retirement savings scheme retirement scheme contribution RLWT rules RSCT RSCT rules RWT rules superannuation fund 2004 No 35 s BE 1 Section BE 1(1) heading substituted 6 October 2009 section 5(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BE 1(1) substituted 6 October 2009 section 5(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BE 1(5) heading substituted 6 October 2009 section 5(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BE 1(5) substituted 6 October 2009 section 5(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BE 1(5B) heading inserted 1 April 2008 section 308(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section BE 1(5B) inserted 1 April 2008 section 308(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section BE 1(6) heading replaced 1 July 2016 section 38(1) Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 Section BE 1(6) replaced 1 July 2016 section 38(1) Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 Section BE 1 list of defined terms employer's superannuation cash contribution inserted 6 October 2009 section 5(5)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BE 1 list of defined terms employer's superannuation contribution repealed 6 October 2009 section 5(5)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BE 1 list of defined terms FDP repealed 6 October 2009 section 5(6) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BE 1 list of defined terms FDP rules repealed 6 October 2009 section 5(6) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BE 1 list of defined terms PAYE income payment inserted 6 October 2009 section 5(5)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BE 1 list of defined terms PAYE payment repealed 6 October 2009 section 5(5)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BE 1 list of defined terms residential land purchase amount inserted 1 July 2016 section 38(2) Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 Section BE 1 list of defined terms retirement savings scheme inserted 1 April 2008 section 308(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section BE 1 list of defined terms retirement scheme contribution inserted 1 April 2008 section 308(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section BE 1 list of defined terms RLWT rules inserted 1 July 2016 section 38(2) Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 Section BE 1 list of defined terms RSCT inserted 1 April 2008 section 308(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section BE 1 list of defined terms RSCT rules inserted 1 April 2008 section 308(2) Taxation (Business Taxation and Remedial Matters) Act 2007
BF: Other obligations
Contents
BF 1: Other obligations
A person must pay the following types of income or ancillary tax under the relevant Part:
a: qualifying company election tax under Part H
b: income tax on taxable distributions from non-complying trusts under Part H
bb: multinational top-up tax under Part H
c: further income tax under Part O
d: RLWT under subpart RL section RL 2
e: ancillary tax further income tax income tax multinational top-up tax non-complying trust pay qualifying company election tax RLWT taxable distribution 2004 No 35 s BF 1 Section BF 1(bb) inserted 1 January 2025 section 6(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section BF 1(d) replaced 1 July 2016 section 39(1) Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 Section BF 1(e) repealed 2 June 2016 section 4 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section BF 1 list of defined terms further FDP repealed 6 October 2009 section 6(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section BF 1 list of defined terms multinational top-up tax inserted 1 January 2025 section 6(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section BF 1 list of defined terms RLWT inserted 1 July 2016 section 39(2) Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 Section BF 1 list of defined terms withdrawal tax repealed 29 March 2018 section 5 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
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 2004 No 35 s BG 1
BH: Double tax agreements
Contents
BH 1: Double tax agreements
Meaning
1: Double tax agreement
a: has been negotiated for 1 or more of the purposes set out in subsection (2); and
b: has been agreed between—
i: 1 or more governments of territories
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 comes into force as declared by the Governor-General by Order in Council and on the date determined under the agreement. Secondary legislation
3B: An Order in Council under subsection (3) is secondary legislation ( see Part 3 Overriding effect
4: Despite anything in this Act, except the provisions listed in subsection (4B), or in any other Inland Revenue Act or the Official Information Act 1982 Privacy Act 2020
a: income tax:
b: any other tax imposed by this Act:
c: the exchange of information that relates to a tax, as defined in paragraph (a)(i) to (v) of the definition of tax section 3(1) Provisions
4B: The provisions of this Act referred to in subsection (4) are—
a: subsection (4C):
b: subsection (5):
c: subsection (5B):
d: section BG 1
e: section GB 54
f: section RF 11C Exclusion: multinational top-up tax
4C: A double tax agreement does not have effect in relation to multinational top-up tax unless the double tax agreement expressly provides otherwise. Agreement for recovery of tax
5: An agreement that provides for the recovery of unpaid tax is subject to Part 10A Tax Administration Act 1994 Foreign account information-sharing agreements
5B: A foreign account information-sharing agreement is subject to Part 11B 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. Reference to unrelated persons
7: A reference in a double tax agreement to 2 persons being unrelated is to be read, if possible, as a reference to 2 persons being not associated. associated business double tax agreement income income tax Inland Revenue Acts multinational top-up tax net income New Zealand New Zealand resident non-resident pay source in New Zealand tax 2004 No 35 s BH 1 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section BH 1(1)(b)(i) amended 21 February 2017 section 4 Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section BH 1(3) replaced 30 March 2017 section 6(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section BH 1(3B) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section BH 1(3B) inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section BH 1(4) heading replaced 1 January 2025 section 7(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section BH 1(4) replaced 1 January 2025 section 7(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section BH 1(4B) heading inserted 1 January 2025 section 7(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section BH 1(4B) inserted 1 January 2025 section 7(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section BH 1(4C) heading inserted 1 January 2025 section 7(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section BH 1(4C) inserted 1 January 2025 section 7(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section BH 1(5B) heading inserted 1 July 2014 section 6(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section BH 1(5B) inserted 1 July 2014 section 6(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section BH 1(7) heading added 8 December 2009 section 5 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section BH 1(7) added 8 December 2009 section 5 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section BH 1 list of defined terms associated inserted 8 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section BH 1 list of defined terms multinational top-up tax inserted 1 January 2025 section 7(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
C: Income
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 2004 No 35 s CA 1
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 2004 No 35 s CA 2
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 2004 No 35 s CB 1
CB 2: Amounts received on disposal of business assets that include trading stock
When this section applies
1: This section applies in an income year when—
a: a person ( person A person B
b: the disposal is made outside the ordinary course of the business, or to put an end to the business or a part of it; and
c: the assets consist of or include trading stock of the business, or a share or interest in trading stock. Assessable income of person A
2: An amount that person A receives from the disposal of the trading stock is taken into account in determining their income for the income year. The amount is derived at the time of disposal referred to in subsection (1). Price of acquisition by person B
3: In the calculation of the taxable income of person B for the income year or a later income year, person B is treated as acquiring the trading stock for the amount of the disposal referred to in subsection (2). Disposal
4: In this section, a disposal—
a: includes the passing of property by an exchange, gift, distribution under a will or on intestacy; and
b: does not include a disposal under any of sections FC 3 to FC 8 Relationship with section CB 1
5: This section overrides section CB 1 amount assessable income business dispose distribution income year market value property taxable income trading stock 2004 No 35 s FB 3 Schemes for profit
CB 3: 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 2004 No 35 s CB 2 Personal property
CB 4: 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 2004 No 35 s CB 3
CB 5: 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 2004 No 35 s CB 4 Land
CB 6A: Disposal within 2 years: bright-line test for residential land
Income if land disposed of within 2 years
1: An amount that a person derives from disposing of residential land is income of the person if the person’s bright-line end date is within 2 years of their bright-line start date. Meaning of bright-line start date
2: A person’s bright-line start date The following table is small in size and has 3 columns. Column 1 is headed Row. Column 2 is headed Condition to be satisfied. Column 3 is headed Bright-line start date for person’s disposal of residential land. Row Condition to be satisfied Bright-line start date for person’s disposal of residential land 1 If none of the other rows apply The date on which the instrument to transfer the land to the person was registered under the Land Transfer Act 2017 2 Land outside New Zealand The date on which the instrument to transfer the land to the person was registered under foreign laws of a similar nature to the Land Transfer Act 2017 3 An instrument to transfer the land to the person was not registered before the person’s bright-line end date The date the person acquired an estate or interest in the land under section CB 15B 4 The land was acquired from another person on completion of a land development or subdivision The date the sale and purchase agreement for the developed or subdivided land was entered into 5 The land results from the person subdividing their land (the undivided land The person’s bright-line start date for the undivided land 5B The land results from the person subdividing land they co-own The date given by section CW 3C 6 The land is a freehold estate converted from a lease with perpetual right of renewal The date of the grant of the leasehold estate 7 A joint tenancy is converted to a tenancy in common or a tenancy in common is converted to a joint tenancy To the extent the person’s share or notional share in the land is unchanged, the person’s bright-line start date for the land before the conversion 8 A change of trustees Where land is transferred from a trustee of a trust ( trustee A (trustee B How to use this table: Transfers of land to and from existing landowners
3: For the purposes of subsection (2), when a person who owns land ( pre-existing land transferred land transferred land Meaning of bright-line end date
4: Bright-line end date
a: the earliest of—
i: the date the person enters into an agreement for the disposal:
ii: the date on which the person makes a gift of the land:
iii: the date on which the land is compulsorily acquired under any Act by the Crown, a local authority, or a public authority:
iv: if there is a mortgage secured on the land, the date on which the land is disposed of by or for the mortgagee because the mortgagor defaulted; or
b: if none of paragraph (a)(i) to (iv) apply, the date on which the estate or interest in the land is disposed of. When this section does not apply
5: This section does not apply—
a: to a disposal of land by—
i: an executor or administrator who acquired the land in the circumstances described in section FC 1(1)(a)
ii: a beneficiary who acquired the land in the circumstances described in section FC 1(1)(b)
b: if—
i: any of sections CB 6 to CB 12
ii: section CB 16A
iii: section FC 9 Relationship with subject matter
6: This section is modified by sections FB 3A FO 10 FO 17 subpart FD amount bright-line end date bright-line start date dispose income land lease leasehold estate local authority mortgage New Zealand own public authority residential land trust trustee year Section CB 6A replaced 1 July 2024 section 8(3) section 8(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CB 6A table row 5B inserted 29 March 2025 section 5(1) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 6A(5) replaced 29 March 2025 section 5(2) section 5(3) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CB 6AB: Residential land transferred in relation to certain family trusts and other capacities
Section CB 6AB repealed 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CB 6AC: Residential land transferred in relation to certain Māori family trusts
Section CB 6AC repealed 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CB 6AE: Certain transfers of residential land included in settlement of claim under the Treaty of Waitangi
Section CB 6AE repealed 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CB 6: 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 16 section CB 19 Land partially disposed of disposed of
3: amount business dispose income land 2004 No 35 ss CB 5 OB 1 land Section CB 6(3) heading repealed 30 March 2017 section 8(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CB 6(3) repealed 30 March 2017 section 8(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CB 7: 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 16 section CB 19 amount associated person business dispose improvements income land 2004 No 35 s CB 6
CB 8: 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; and
d: the person notifies
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 notice notify 2004 No 35 s CB 6B Section CB 8(c) substituted 1 April 2010 section 7(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CB 8(d) amended 2 June 2016 section 5(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CB 8 list of defined terms notice inserted 2 June 2016 section 5(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CB 8 list of defined terms notify inserted 2 June 2016 section 5(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
CB 9: 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: Subsection (2) is overridden by the exclusions in sections CB 15C CB 15D Kāinga Ora–Homes and Communities sections CB 16 CB 19 amount associated person business dispose income Kāinga Ora–Homes and Communities land year 2004 No 35 s CB 7 Section CB 9(3) replaced 18 March 2019 section 116 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 9(3) amended 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CB 9 list of defined terms Kāinga Ora–Homes and Communities inserted 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CB 10: 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: Subsection (2) is overridden by the exclusions in sections CB 15C CB 15D Kāinga Ora–Homes and Communities sections CB 16 CB 19 amount associated person business dispose income Kāinga Ora–Homes and Communities land year 2004 No 35 s CB 8 Section CB 10(3) replaced 18 March 2019 section 117 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 10(3) amended 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CB 10 list of defined terms Kāinga Ora–Homes and Communities inserted 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CB 11: 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 they dispose of the land and—
a: within 10 years before the disposal, the person or an associate of the person completed improvements to the land; and
b: at the time the improvements were begun,—
i: the person carried on a business of erecting buildings:
ii: an associate of the person carried on a business of erecting buildings. Person or associate
2: Subsection (1) applies whether or not the land was acquired for the person’s business or an associate’s business. Exclusions
3: Subsection (1)(b)(ii) is overridden by the exclusions in sections CB 15C CB 15D Kāinga Ora–Homes and Communities sections CB 16 CB 19 amount associated person business dispose improvements income Kāinga Ora–Homes and Communities land year 2004 No 35 s CB 9 Section CB 11(1) heading replaced 18 March 2019 section 118(1) section 118(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 11(1) replaced 18 March 2019 section 118(1) section 118(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 11(2) heading replaced 18 March 2019 section 118(1) section 118(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 11(2) replaced 18 March 2019 section 118(1) section 118(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 11(3) replaced 18 March 2019 section 118(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 11(3) amended 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CB 11 list of defined terms Kāinga Ora–Homes and Communities inserted 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CB 12: 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 17 section CB 20 section CB 21 section CB 23 amount business dispose income land year 2004 No 35 s CB 10
CB 13: 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 6A , and CB 14
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 17 section CB 20 section CB 21 section CB 23 Relationship with section DB 27
3: Section DB 27 amount business deduction dispose income land 2004 No 35 s CB 11 Section CB 13(1)(a) amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CB 13(1)(a) amended 30 March 2021 section 7 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 13(1)(a) amended 16 November 2015 section 5(1) Taxation (Bright-line Test for Residential Land) Act 2015 Section CB 13(2) heading substituted 1 April 2008 section 309 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CB 13(2) substituted 1 April 2008 section 309 Taxation (Business Taxation and Remedial Matters) Act 2007
CB 14: 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 6A to CB 12
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 18 section CB 22 amount dispose income land year 2004 No 35 s CB 12 Section CB 14(1)(a) amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CB 14(1)(a) amended 30 March 2021 section 8 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 14(1)(a) amended 16 November 2015 section 6(1) Taxation (Bright-line Test for Residential Land) Act 2015 Section CB 14(2)(a) amended 23 December 2023 section 6 Resource Management (Natural and Built Environment and Spatial Planning Repeal and Interim Fast-track Consenting) Act 2023 Section CB 14(2)(e) amended 23 December 2023 section 6 Resource Management (Natural and Built Environment and Spatial Planning Repeal and Interim Fast-track Consenting) Act 2023 Section CB 14(2)(g) amended 23 December 2023 section 6 Resource Management (Natural and Built Environment and Spatial Planning Repeal and Interim Fast-track Consenting) Act 2023 Section CB 14(2)(i) amended 23 December 2023 section 6 Resource Management (Natural and Built Environment and Spatial Planning Repeal and Interim Fast-track Consenting) Act 2023
CB 15: Transactions between associated persons
Income
1: An amount that a person (the transferee
a: the land has been transferred to the transferee from another person (the 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 6 to CB 14 Exclusion for Kāinga Ora–Homes and Communities
1B: Subsection (1) is overridden by section CB 15D Date on which some transferees acquire land
2: For the purposes of sections CB 7 to CB 12 CB 14 transferor transferee amount associated person dispose income land 2004 No 35 s CB 13 Section CB 15(1) amended 18 March 2019 section 119(1) section 119(4) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 15(1B) heading inserted 18 March 2019 section 119(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 15(1B) heading amended 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CB 15(1B) inserted 18 March 2019 section 119(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 15(2) replaced 18 March 2019 section 119(3) section 119(4) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
CB 15B: When land acquired
General rule
1: For the purposes of this subpart land First exception: acquisition of land by company to be formed
2: If a person, on behalf of a company to be formed, enters an agreement under which the company will have land, the company is treated, for the purposes of this subpart in relation to the land, as existing from when the person enters the agreement. Second exception: land from exercise of option
3: A person that exercises an option to acquire land and acquires the land, is treated as acquiring the land at the time when they exercise the option. Relationship with subparts FB and FC
4: Subsections (1) to (3) are overridden, for a transaction, by a provision in subpart FB FC company estate interest land Section CB 15B inserted 30 June 2014 section 7(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CB 15B(1) amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CB 15B(1) amended 16 November 2015 section 7(1) Taxation (Bright-line Test for Residential Land) Act 2015 Section CB 15B(3) heading replaced 21 February 2017 section 63 Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CB 15B(3) replaced 21 February 2017 section 63 Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CB 15B(3) heading replaced 21 February 2017 section 64 Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CB 15B(3) replaced 21 February 2017 section 64 Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Exclusions for bodies controlled by local authorities Heading inserted 30 March 2017 section 12 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CB 15C: Council-controlled organisations and other companies
Exclusion from application of some land provisions: kinds of associated persons
1: Sections CB 9(2) CB 10(2) CB 11(1)(b)(ii) person A person B
a: person A is a local authority or—
i: a council-controlled organisation that is linked by ownership or control to the local authority:
ii: an entity referred to in section 6(4)(a) to (ca)
iii: an entity that is associated with the local authority other than under section YB 14
b: person B is—
i: the local authority or an organisation or entity of a kind referred to in paragraph (a)(i) to (iii):
ii: a person that is not associated with person A other than under section YB 14 Exclusion from application of some land provisions: members of consolidated group
2: If person A and person B are members of a consolidated group, and subsection (1) applies to prevent an amount from being income of person A, the amount is not income of person A under section CV 2 associated person consolidated group council-controlled organisation local authority Section CB 15C inserted 30 March 2017 section 12 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CB 15C(1) amended 18 March 2019 section 120 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Exclusions for Kāinga Ora–Homes and Communities Heading inserted 18 March 2019 section 121 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Heading amended 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CB 15D: Kāinga Ora–Homes and Communities Exclusion from application of some land provisions
1: Sections CB 9(2) CB 10(2) CB 11(1)(b)(ii) CB 15(1) Kāinga Ora–Homes and Communities Kāinga Ora–Homes and Communities Exclusion for group members and members of consolidated group
2: If subsection (1) applies to prevent an amount from being income of a person who is a member of a wholly-owned group of companies or a consolidated group, the amount is not income of the person under section CV 1 CV 2 amount company consolidated group income Kāinga Ora–Homes and Communities wholly-owned group of companies Section CB 15D inserted 18 March 2019 section 121 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 15D heading amended 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CB 15D(1) amended 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CB 15D list of defined terms Kāinga Ora–Homes and Communities inserted 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Exclusion for land acquired from a co-owner on a partition or subdivision Heading inserted 28 March 2024 section 11 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CB 15E: Disposals of land subject to section CW 3C
When this section applies
1: This section applies to a person for a disposal of land acquired from a co-owner on a partition or subdivision if—
a: the person derives income from the disposal under section CB 15(1)
b: had the person disposed of their interest in the land that was partitioned or subdivided immediately before the partition or subdivision, section CB 15(1) Exempt income when no or minor acquisition of land on partition or subdivision
2: The amount of income the person derives under section CB 15(1) section CW 3C section CW 3C Partially exempt income when more than minor acquisition of land on partition or subdivision
3: If subsection (2) does not apply, the amount of income the person derives under section CB 15(1) exempt income to the extent given amount derived x (acquisition proportion ÷ end value proportion). Definition of items in formula
4: The items in the formula are defined in subsections (5) to (7). Amount derived
5: Amount derived Acquisition proportion
6: Acquisition proportion section CW 3C End value proportion
7: End value proportion section CW 3C Exclusion for group members and members of consolidated group
8: If subsection (2) or (3) applies to prevent an amount from being income of a person who is a member of a wholly-owned group of companies or a consolidated group, the amount is not income of the person under section CV 1 CV 2 acquisition proportion amount associated consolidated group co-owner dispose end value proportion exempt income income land wholly-owned group of companies Section CB 15E inserted 28 March 2024 section 11 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CB 15E(1)(a) replaced 29 March 2025 section 6(1) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 15E(1)(b) replaced 29 March 2025 section 6(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 15E(2) heading replaced 29 March 2025 section 6(3) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 15E(2) amended 29 March 2025 section 6(4) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 15E(3) heading replaced 29 March 2025 section 6(5) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 15E(3) amended 29 March 2025 section 6(6)(a) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 15E(3) amended 29 March 2025 section 6(6)(b) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 15E list of defined terms acquisition proportion inserted 29 March 2025 section 6(7) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 15E list of defined terms end value proportion inserted 29 March 2025 section 6(7) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Exclusions for residential land
CB 16A: Main home exclusion for disposal within 2 years
Main home exclusion
1: Section CB 6A
a: the person; or
b: a beneficiary of a trust, if the person is a trustee of the trust and—
i: a principal settlor of the trust does not have a main home; or
ii: if a principal settlor of the trust does have a main home, it is that main home that the person is disposing of. Modified rule for constructing main home
2: For the purposes of determining under subsection (1) whether residential land has been used for most of the bright-line period predominantly for a dwelling that was the main home of the person or a beneficiary of a trust, as described in subsection (1), the period in which the dwelling was constructed is ignored. When this section does not apply
3: The exclusion in subsection (1) does not apply to a person who disposes of residential land if—
a: the exclusion has been used by the person twice within the 2 years immediately preceding the bright-line end date for the residential land:
b: the person has engaged in a regular pattern of acquiring and disposing of residential land described in subsection (1). Person may include group of persons
4: For the purposes of subsection (3)(b), person Meaning of group of persons
5: For the purposes of subsection (4), a group of persons
a: means 2 or more persons when together all the persons occupy, or have occupied, residential land described in subsection (1); and
b: includes a person other than a natural person (the non-natural person bright-line end date dispose dwelling group of persons land main home own principal settlor residential land trust trustee year Section CB 16A replaced 1 July 2024 section 12(5) section 12(6) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CB 16: Residential exclusion from sections CB 6 to CB 11
Exclusion
1: Sections CB 6 to CB 11
a: the person ( person A
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: person A
ii: if members of person A’s person A person A’s
iii: if person A 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. Exception
3: The exclusion does not apply when—
a: section CB 6(1)
b: person A has engaged in a regular pattern of acquiring and disposing of land described in subsection (1). Regular patterns undertaken by groups of persons
4: For the purposes of subsection (3), in relation to land described in subsection (1), person A includes a group of persons if the requirements of subsection (5) are met. Meaning of group of persons
5: For the purposes of subsection (4), a group of persons
a: means 2 or more persons when together all of the persons occupy, or have occupied, land described in subsection (1); and
b: includes a person other than a natural person (the non-natural person dispose group of persons land trustee 2004 No 35 s CB 14 Section CB 16(1)(a) amended 30 March 2021 section 11(1)(a) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16(1)(b) replaced 18 March 2019 section 123(1) section 123(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 16(1)(b)(i) amended 30 March 2021 section 11(1)(b) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16(1)(b)(ii) amended 30 March 2021 section 11(1)(b) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16(1)(b)(ii) amended 30 March 2021 section 11(1)(c) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16(1)(b)(iii) amended 30 March 2021 section 11(1)(b) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16(3) heading replaced 30 March 2021 section 11(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16(3) replaced 30 March 2021 section 11(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16(4) heading inserted 30 March 2021 section 11(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16(4) inserted 30 March 2021 section 11(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16(5) heading inserted 30 March 2021 section 11(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16(5) inserted 30 March 2021 section 11(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 16 list of defined terms group of persons inserted 30 March 2021 section 11(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
CB 17: Residential exclusion from sections CB 12 and CB 13
Exclusion: developing or dividing land for residential use
1: Sections CB 12 CB 13
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,—
i: the person:
ii: if members of the person’s family live with them, the person and members of the person’s family living with them. Exclusion: dividing residential land
2: Sections CB 12 CB 13
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 was 4,500 square metres or less immediately before it was divided and was occupied mainly as residential land for,—
i: the person:
ii: if members of the person’s family live with them, the person and members of their family living with them. land 2004 No 35 s CB 15 Section CB 17(1) amended 1 April 2008 section 310 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CB 17(1)(b) replaced 18 March 2019 section 124(1) section 124(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 17(2)(b) replaced 18 March 2019 section 124(2) section 124(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
CB 18: Residential exclusion from section CB 14
Exclusion
1: Section CB 14
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,—
i: the person:
ii: if members of the person’s family live with them, the person and members of the person’s 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 2004 No 35 s CB 16 Section CB 18(3)(a) replaced 18 March 2019 section 125(1) section 125(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Exclusions for business premises
CB 19: Business exclusion from sections CB 6 to CB 11
Exclusion
1: Sections CB 6 to CB 11 a disposal of land by a person ( person A
a: the land is the premises of a business; and
b: person A Exception
2: The exclusion does not apply when—
a: section CB 6(1)
b: person A has engaged in a regular pattern of acquiring and disposing of land described in subsection (1). When regular patterns undertaken by groups of persons
2B: For the purposes of subsection (2), person A includes a group of persons if the requirements of subsection (2C) are met. Meaning of group of persons
2C: For the purposes of subsection (2B), a group of persons
a: the persons occupy premises mainly to carry on a substantial business from them as described in subsection (1)(b), irrespective of the nature of any business carried on from the premises; and
b: a person, whether or not they occupy premises as described in subsection (1)(b), has significant involvement in, or control of, the activities of all persons referred to in paragraph (a) (the occupiers 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 group of persons land 2004 No 35 s CB 17 Section CB 19(1) amended 30 March 2021 section 12(1)(a) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 19(1)(b) amended 30 March 2021 section 12(1)(b) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 19(2) heading replaced 30 March 2021 section 12(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 19(2) replaced 30 March 2021 section 12(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 19(2B) heading inserted 30 March 2021 section 12(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 19(2B) inserted 30 March 2021 section 12(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 19(2C) heading inserted 30 March 2021 section 12(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 19(2C) inserted 30 March 2021 section 12(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 19 list of defined terms group of persons inserted 30 March 2021 section 12(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
CB 20: Business exclusion from
sections CB 12 and CB 13 Sections CB 12 CB 13
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 2004 No 35 s CB 18 Section CB 20 amended 1 April 2008 section 311(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CB 20 heading amended 1 April 2008 section 311(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Exclusions for farm land
CB 21: Farm land exclusion from sections CB 12 and CB 13
Exclusion
1: Sections CB 12 CB 13
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, or both of them, mainly for the purposes of a farming or agricultural business carried on by either or both of them; and
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 pay 2004 No 35 s CB 19
CB 22: Farm land exclusion from section CB 14
Exclusion
1: Section CB 14
a: the person ( person A
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 14(1) business dispose land 2004 No 35 s CB 20 Exclusion for investment land
CB 23: Investment exclusion from
sections CB 12 and CB 13 Sections CB 12 CB 13
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 2004 No 35 s CB 21 Section CB 23 amended 1 April 2008 section 312(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CB 23 heading amended 1 April 2008 section 312(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Partial or multiple disposals of land Heading inserted 30 March 2025 section 7 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CB 23B: Land partially
disposed of disposed of Sections CB 6A CB 23
a: part of the land to which the relevant section applies:
b: the whole of the land to which the relevant section applies:
c: disposed of together with other land. amount dispose land 2004 No 35 s CB 5A Section CB 23B inserted 1 April 2008 section 313 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CB 23B heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CB 23B amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CB 23B amended 30 March 2021 section 13 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CB 23B amended 16 November 2015 section 9(1) Taxation (Bright-line Test for Residential Land) Act 2015 Timber
CB 24: 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. Disposal for below market value
3: Section GC 2 amount dispose income own right to take timber standing timber 2004 No 35 s CB 22
CB 25: 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 2017
c: trees subject to a right to take a benefit (in the form of a profit a 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 2004 No 35 s CB 23 Section CB 25(2)(b) amended 12 November 2018 section 250 Land Transfer Act 2017 Investments
CB 26: Disposal of certain shares by portfolio investment entities
When this section applies
1: This section applies when—
a: the income from the disposal by a person (the entity section CX 55
ab: the share is not in a listed PIE; and
b: 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; and
c: the entity attributes the proceeds from the disposal to investors who are not entitled to the benefit of the dividend. Income
2: The entity is treated as deriving an amount of income calculated using the formula— (shares at declaration − shares on distribution) × dividend. Definition of items in formula
3: In the formula,—
a: shares at declaration
b: shares on distribution
c: dividend Positive result
4: The result of the formula must be a positive amount. amount company dividend excluded income fully imputed ICA company income listed PIE pay portfolio investment entity share 2007 No 97 s CB 26 Section CB 26 substituted 1 April 2010 section 8(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CB 26(1)(ab) inserted 30 June 2014 section 8(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CB 26(1)(b)(ii) amended 17 July 2013 section 4 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CB 26(1)(c) inserted 17 July 2013 section 4 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CB 26 list of defined terms listed PIE inserted 30 June 2014 section 8(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Farming, forestry, or fishing
CB 27: 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:
c: sections EH 72 EH 74 EH 76 income main income equalisation scheme person thinning operations income equalisation scheme 2004 No 35 s CB 24 Section CB 27(b) repealed 18 March 2019 section 126(1) section 126(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 27 list of defined terms adverse event income equalisation scheme repealed 18 March 2019 section 126(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
CB 27B: Entering partners’ livestock income
Section CB 27B repealed 6 October 2009 section 9(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Environmental restoration
CB 28: Environmental restoration accounts
Income from refund
1: A person who receives a refund for a tax year under section EK 12 application refund ÷ tax rate. 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 transfer ÷ tax rate. 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 set out in schedule 1 Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits
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 19 or making of noise
a: the deduction under section DB 46 or making of noise
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 46
b: the total deduction for the expenditure that the person would have had under section DB 46 apply corresponding income year environmental restoration account income income tax resource consent taxable income tax year 2004 No 35 s CB 24B Section CB 28(1) amended 2 June 2016 section 6(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CB 28(5)(a) amended 1 April 2008 section 562 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CB 28(7) amended 18 March 2019 section 127(a) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 28(7)(a) amended 18 March 2019 section 127(b) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CB 28 list of defined terms apply inserted 2 June 2016 section 6(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Minerals
CB 29: 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 2004 No 35 s CB 25 Intellectual property
CB 30: Disposal If a person derives an amount from the disposal disposal amount income patent rights 2004 No 35 s CB 26 Section CB 30 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CB 30 amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Transfer of business
CB 31: Disposal When this section applies
1: This section applies when section DC 10 Disposal 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 pay 2004 No 35 s CB 27 Section CB 31 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CB 31(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Stolen property
CB 32: 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 2004 No 35 s CB 28 Look-through companies Heading inserted 1 April 2011 section 26(1) Taxation (GST and Remedial Matters) Act 2010
CB 32B: Owners of look-through companies
A person who has an effective look-through interest for a look-through company has an amount of income to the extent to which an amount of income results from the application of subpart HB companies) or section HZ 8 section HB 4 amount effective look-through interest income look-through company Section CB 32B inserted 1 April 2011 section 26(1) Taxation (GST and Remedial Matters) Act 2010 Section CB 32B amended 1 April 2017 section 13 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CB 32C: Dividend income for first year of look-through company
When this section applies
1: This section applies for an income year when, in the income year, the person has—
a: an effective look-through interest for a look-through company ( LTC
b: an effective look-through interest for a look-through company on the day after the LTC amalgamates in that year with a company that ceases to exist after the amalgamation (the amalgamating company Income
2: The person has an amount of income under—
a: subsection (4); or
b: subsection (8), if—
i: the relevant LTC was a qualifying company in the relevant previous year; and
ii: a dividend under subsection (4) would not be fully imputed. Dividend
3: An amount of income under subsection (4) or (8) is treated as a dividend including an attached imputation credit, as provided by the relevant subsection. Formula
4: For the purposes of subsection (2)(a), the amount of income is a positive amount calculated using the formula— (untaxed reserves + reserves imputation credit) × effective interest. Definition of items in formula
5: In the formula in subsection (4),—
a: untaxed reserves
b: reserves imputation credit section OA 18
c: effective interest Formula
6: For the purposes of subsection (5)(a), the amount of untaxed reserves is calculated using the formula— dividends – assessable income – exit exemption. Definition of items in formula
7: In the formula in subsection (6),—
a: dividends company
i: it disposed of all of its property, other than cash, to an unrelated person at market value for cash; and
ii: it met all of its liabilities at market value, including income tax liabilities for the disposal year but excluding income tax liabilities that would arise solely from meeting all of its liabilities at market value or from disposing of all of its property; and
iii: it was liquidated, with the amount of cash remaining being distributed to shareholders without imputation credits attached:
b: assessable income
c: exit exemption section CX 63(2) Formula
7B: For the purposes of subsection (5)(b), the amount of reserves imputation credit is calculated using the formula— current credits + future amounts. Definition of items in formula
7C: In the formula in subsection (7B),—
a: current credits
b: future amounts Formula
8: For the purposes of subsection (2)(b), the amount of income is a positive amount calculated using the formula— ((balances ÷ tax rate – balances) + balances imputation credit) × effective interest. Definition of items in formula
9: In the formula in subsection (8),—
a: balances
i: the balance in the company’s imputation credit account on the relevant day
ii: an amount of income tax payable for an earlier income year but not paid on or before
b: tax rate
c: balances imputation credit balances
d: effective interest Relevant day
10: In this section
a: the last day of the income year before the income year described in subsection (1)(a), as applicable; or
b: the day of the amalgamation described in subsection (1)(b), as applicable. Income tax and refund
11: For the purposes of subsections (7C)(b) and (9)(a)(ii)
a: income tax payable is income tax that would, when paid, give rise to a credit in the company’s imputation credit account under sections OB 4 to OB 29
b: a refund of income tax due is the amount that would, when paid, give rise to a debit to the company’s imputation credit account under sections OB 30 to OB 59 amalgamating company amalgamation amount assessable income basic tax rate company deduction dispose dividend effective look-through interest fully imputed imputation credit imputation credit account income income tax income year liquidation look-through company qualifying company Section CB 32C replaced 1 April 2017 section 14(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CB 32C(5)(b) replaced 29 March 2018 section 8(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CB 32C(7)(a)(ii) replaced 29 March 2018 section 8(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CB 32C(7B) heading inserted 29 March 2018 section 8(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CB 32C(7B) inserted 29 March 2018 section 8(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CB 32C(7C) heading inserted 29 March 2018 section 8(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CB 32C(7C) inserted 29 March 2018 section 8(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CB 32C(9)(a)(i) amended 29 March 2018 section 8(4)(a) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CB 32C(9)(a)(ii) amended 29 March 2018 section 8(4)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CB 32C(10) amended 29 March 2018 section 8(5) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CB 32C(11) amended 29 March 2018 section 8(6) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Mutual associations
CB 33: Amounts derived by mutual associations
When this section applies
1: This section applies when an association enters into a transaction of a kind described in section HE 2
a: 1 or more members; or
b: 1 or more members along with 1 or more persons who are not members of the association. Income: other income provisions
2: If the association derives from the transaction an amount that would, in the absence of this subsection, be income under a provision in this Part but for the mutual character of the transaction, the amount is income of the association. amount association income income year member 2004 No 35 s HF 1(1) Section CB 33(2) heading substituted 7 September 2010 section 5(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CB 33(2) substituted 7 September 2010 section 5(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CB 34: Amounts derived by members from mutual associations
When this section applies
1: This section applies when an association, in relation to a mutual transaction, pays an association rebate to a member in an income year in circumstances where a payment for the transaction would be taken into account in determining the taxable income of the member. Income
2: The amount of the association rebate is income of the member in the income year but only to the extent of the amount of the association’s deduction under section DV 19 Statutory producer boards: timing of payment
3: If a statutory producer board pays an association rebate to a member that is a mutual association, the association is treated as deriving the amount in the income year in which the producer board chooses under section DV 19(7) When amount paid
4: For the purposes of this section, an amount is treated as having been paid to a person when it is credited in account or dealt with in some way in their interest or on their behalf. Subsection (3) overrides this subsection. Relationship with dividend rules
5: An association rebate—
a: is not a dividend to the extent to which it is a payment of the kind described in subsection (2) and is no more than the amount of the deduction the association is allowed under section DV 19
b: for an association that is not a company, and to the extent to which it is more than the amount of the deduction the association is allowed under section DV 19 amount association association rebate deduction dividend income income year member pay statutory producer board 2004 No 35 s HF 1(3)(c), (5), (6) Partners and partnerships Heading added 1 April 2008 section 5(1) Taxation (Limited Partnerships) Act 2008
CB 35: Amounts of income for partners
A person who is a partner has an amount of income to the extent to which an amount of income results from the application of subpart HG amount income partner partnership Section CB 35 added 1 April 2008 section 5(1) Taxation (Limited Partnerships) Act 2008 Emissions units under Climate Change Response Act 2002 Heading substituted 6 October 2009 section 10 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CB 36: Disposal of emissions units
When this section applies
1: This section applies when a person disposes of an emissions unit. Income
2: The amount that the person derives on the disposal is income. Surrender of unit: deemed sale at given value
3: If the disposal is by surrender under the Climate Change Response Act 2002
a: the unit's cost, if none of paragraphs (b) to (f) applies; or
b: the unit's value under section ED 1(7B)
c: zero, if subsection (4) applies; or
d: zero, if subsection (5) applies; or
e: the unit's market value, if subsection (6) applies; or
f: the unit's market value, if subsection (7) applies. Surrender of unit: emissions relating to post-1989 forest land
4: The person is treated as selling the unit for an amount of zero if the person surrenders the emissions unit , including for ceasing an activity in relation to post-1989 forest land Surrender of unit: under forest sink covenant
4B: The person is treated as selling the unit for an amount of zero if the person transfers the emissions unit to the Crown under a forest sink covenant under section 67Y Surrender of unit: deforestation of some pre-1990 forest land
5: The person is treated as selling the unit for an amount of zero if—
a: the person surrenders the emissions unit in relation to the deforestation of pre-1990 forest land; and
b: the person would derive income, other than exempt income or excluded income, from a disposal of the land without timber at the time of the surrender. Surrender of post-1989 forest land emissions unit or forest sink emissions unit: for other purposes
6: The person is treated as selling a post-1989 forest land emissions unit or forest sink emissions unit for an amount equal to the unit's market value if the person surrenders the emissions unit other than—
a: for emissions in relation to post-1989 forest land:
b: by a transfer to the Crown required by a permanent forestry scheme:
c: for ceasing an activity in relation to post-1989 forest land. Surrender of unit: free unit other than forest land unit
7: The person is treated as selling a unit that is not a forest land emissions unit for an amount equal to the unit's market value if—
a: the person surrenders the unit when it has a value of zero; and
b: the unit was transferred to the person under Part 4, subpart 2 Converted unit treated as sold
8: If a person converts a New Zealand emissions unit, other than a forest land emissions unit, into something else under Climate Change Response Act 2002
a: the unit's value under section ED 1(7B)
b: the unit's cost, otherwise. Cancellation of historic approved overseas unit and replacement with New Zealand emissions unit
8B: If a person transfers an approved overseas unit as defined in section 4(1) schedule 1AA clause 14(2)
a: the unit’s value under section ED 1(7B)
b: the unit’s cost, otherwise. Surrender of forest sink emissions unit for entitlement to New Zealand emissions unit
8C: If a person surrenders a forest sink emissions unit under schedule 1AA clause 30(2) schedule 1AA clause 30(4)
a: the unit’s value under section ED 1(7B)
b: the unit’s cost, otherwise. Cancellation of unit
8D: If a person cancels an emissions unit, the person is treated as selling the unit for an amount of zero. Excluded income: pre-1990 forest land emissions unit
9: Section CX 51B Excluded income: fishing quota emissions unit
10: Section CX 51C amount convert emissions unit fishing quota emissions unit forest land emissions unit forest sink emissions unit New Zealand emissions unit permanent forestry scheme pre-1990 forest land emissions unit post-1989 forest land emissions unit surrender Section CB 36 substituted 6 October 2009 section 10 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CB 36(4) amended 29 March 2025 section 8(1) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 36(4) amended 17 July 2013 section 5 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CB 36(4B) heading inserted 7 September 2010 section 6(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CB 36(4B) inserted 7 September 2010 section 6(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CB 36(6) heading substituted 7 September 2010 section 6(2) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CB 36(6) substituted 7 September 2010 section 6(2) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CB 36(6)(b) replaced 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section CB 36(6)(c) inserted 29 March 2025 section 8(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CB 36(7) substituted 21 December 2010 section 27 Taxation (GST and Remedial Matters) Act 2010 Section CB 36(8) amended 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section CB 36(8B) heading inserted 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section CB 36(8B) inserted 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section CB 36(8C) heading inserted 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section CB 36(8C) inserted 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section CB 36(8D) heading inserted 30 March 2022 section 50(1) section 50(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CB 36(8D) inserted 30 March 2022 section 50(1) section 50(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CB 36(9) heading substituted 7 September 2010 section 6(3) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CB 36(10) heading added 7 September 2010 section 6(4) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CB 36(10) added 7 September 2010 section 6(4) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CB 36 list of defined terms fishing quota emissions unit inserted 7 September 2010 section 6(5)(a) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CB 36 list of defined terms forest sink emissions unit inserted 7 September 2010 section 6(5)(b) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CB 36 list of defined terms Kyoto emissions unit repealed 27 February 2014 section 5 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CB 36 list of defined terms permanent forestry scheme inserted 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020
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:
g: other revenues. Amounts derived from certain assets
2B: Despite subsections (1) and (2), an amount referred to in section CW 8B Exception for amount from grant of easement
2C: Relationship with section GC 5
3: The treatment of leases of property to related parties for less than an adequate rent is dealt with in section GC 5 amount business income lease own pay 2004 No 35 s CC 1 Section CC 1(2B) heading inserted 17 July 2013 section 6(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CC 1(2B) inserted 17 July 2013 section 6(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CC1(2C) heading repealed 23 March 2020 section 85 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CC1(2C) repealed 23 March 2020 section 85 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CC 1B: Consideration relating to grant, renewal, extension, or transfer of leasehold estate or licence
When this section applies
1: This section applies when a person (the payee
a: in relation to a right (the land right is—
i: a leasehold estate not including a perpetual right of renewal:
ii: a licence to use land; and
b: as consideration for—
i: the agreement by the payee to the grant, renewal, extension, or transfer of the land right:
ii: the grant, renewal, extension, or transfer of the land right. Income
2: The amount is income of the payee. Exception for payment as consideration for transfer of land right
3: The amount is not income of the payee if—
a: the payee is the holder of the land right; and
b: the amount is consideration for the transfer of the land right to the person paying the amount; and
c: the amount is not sourced from funds provided, by the owner of the estate in land from which the land right is granted, for purposes that include obtaining the surrender or termination of the land right; and
d: each of the payee and the person paying the amount is not associated with the owner of the estate in land from which the land right is granted. Exception for tenant or licensee of residential premises
4: The amount is not income of the payee if the payee—
a: is a natural person and derives the amount as a tenant or licensee of residential premises whose expenditure on the residential premises does not meet the requirements of the general permission; and
b: is not associated with the owner of the estate in land from which the land right is granted. Exception for payment of capital contribution
5: The amount is not income of the payee if the amount is derived as a capital contribution. Exception for payment as consideration for grant of permanent easement
6: The amount is not income of the payee if—
a: the payee is the owner of a fee simple estate in land; and
b: the amount—
i: is consideration for the grant, for the duration of the estate, of an easement over the land; and
ii: is not a periodic payment. amount associated capital contribution estate general permission income land leasehold estate own pay Section CC 1B replaced 1 April 2015 section 10(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CC 1B(1) amended 23 March 2020 section 86(1) section 86(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CC 1B(1)(a) amended 23 March 2020 section 87(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CC 1B(1)(b)(ii) replaced 23 March 2020 section 87(2) section 87(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CC 1B(6) heading inserted 23 March 2020 section 87(3) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CC 1B(6) inserted 23 March 2020 section 87(3) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CC 1C: Consideration for agreement to surrender leasehold estate or terminate licence
When this section applies
1: This section applies when—
a: a person (the payee
i: an estate in land from which is granted a right (the land right
ii: the land right; and
b: derives an amount as consideration for the agreement by the payee to the surrender or termination of the land right. Income
2: The amount is income of the payee. Exception for tenant or licensee of residential premises
3: The amount is not income if the payee is a natural person and derives the amount as a tenant or licensee of residential premises whose expenditure on the residential premises does not meet the requirements of the general permission. amount general permission income land leasehold estate own Section CC 1C inserted 17 July 2013 section 7(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CC 1C(1) replaced 30 June 2014 section 11(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
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 5 and EI 6
4: Subsection (3) is overridden by sections EI 5 EI 6 amount income income year lease repairs 2004 No 35 s CC 2
CC 2B: Compensation for land or buildings affected by emergency events
An amount derived by a person under section FP 5(2) amount income Section CC 2B inserted 1 April 2025 section 9 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CC 2C: Compensation for improvements to land affected by emergency events
An amount derived by a person under section FP 12(2) or (4) amount income Section CC 2C inserted 1 April 2025 section 9 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 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 50 amount financial arrangement income trustee 2004 No 35 s CC 3
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. Non-resident financial arrangement income
3: Non-resident financial arrangement income derived by a person is income of the person. income interest non-resident financial arrangement income pay 2004 No 35 s CC 4 Section CC 4(3) heading inserted 30 March 2017 section 15(1) section 5 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CC 4(3) inserted 30 March 2017 section 15(1) section 5 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CC 4 list of defined terms non-resident financial arrangement income inserted 30 March 2017 section 15(2) section 5 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
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 30
3: This section is overridden by sections CW 4 CW 30 income pay 2004 No 35 s CC 5
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 2004 No 35 s CC 6
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 2004 No 35 s CC 7
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 2004 No 35 s CC 8
CC 8B: Certain commercial bills: non-resident holders
When this section applies
1: This section applies when a non-resident holder of a commercial bill who is required to calculate and allocate income and expenditure under neither the financial arrangements rules nor the old financial arrangements rules because of the application of section EW 9(2) to (4) EZ 45(e)
a: disposes of the commercial bill other than by redemption; or
b: 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 commercial bill financial arrangements rules income non-resident old financial arrangements rules 2004 No 35 s CZ 8 Section CC 8B inserted 6 October 2009 section 11(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, trademark, design or model, plan, secret formula or process, or other similar property or right:
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 natural resource pay royalty standing timber 2004 No 35 s CC 9 Section CC 9 list of defined terms natural resource inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
CC 9B: Resale royalties
When this section applies
1: This section applies when—
a: a person receives a resale royalty in respect of the resale of an original visual artwork under section 18
b: the resale royalty is income of the person under section CB 1 Income
2: The amount of the resale royalty retained by the collection agency under section 20 collection agency income resale royalty Section CC 9B inserted 29 March 2025 section 10 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CC 9C: Amount of resale royalty retained by collection agency
When this section applies
1: This section applies when the collection agency receives an amount of a resale royalty under section 17 Income
2: The amount is not income of the collection agency except to the extent of the amount that the collection agency is entitled to retain under section 20 collection agency income resale royalty Section CC 9C inserted 29 March 2025 section 10 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
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 sections CV 17 and YD 7
4: amount film income 2004 No 35 s CC 10 Section CC 10(4) heading repealed 2 November 2012 section 5 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CC 10(4) repealed 2 November 2012 section 5 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Finance leases
CC 11: Lessee acquiring lease asset on expiry of term of lease
When this section applies
1: This section applies for the purposes of section FA 9 Income of lessee
2: If the lessee disposes of the lease asset for an amount that is more than the consideration paid for it, the difference is income of the lessee in the income year in which they dispose of the asset. consideration finance lease income lessee pay personal property lease asset tax year 2004 No 35 s FC 8E
CC 12: Lessor acquiring lease asset on expiry of term of lease
When this section applies
1: This section applies for the purposes of section FA 10(3)
a: a lessor under the lease sells, assigns, or leases the personal property lease asset to another person under another finance lease; and
b: the consideration is more than the amount determined under section FA 10(2) Income of lessor
2: To the extent to which the difference between the amount determined under section FA 10(2) consideration finance lease income lessee lessor pay personal property lease asset tax year 2004 No 35 s FC 8D(2) Hire purchase agreements
CC 13: Amounts paid in income years after hire purchase agreement ends
When this section applies
1: This section applies for the purposes of section FA 18 Income of seller
2: An amount that the buyer is liable to pay under the terms of the agreement is income of the seller in the income year in which they receive it. Income of buyer
3: An amount paid by the seller to the buyer under section FA 18(3)(b) amount hire purchase agreement income income year pay 2004 No 35 s FC 10(5)(d)–(f) IFRS leases Heading inserted 30 March 2021 section 14(1) section 14(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
CC 14: NZ IFRS 16 leases
When this section applies
1: This section applies when a person has, under section EJ 10B Amount, and timing, of income
2: The person has income quantified and allocated under section EJ 10B amount income person Section CC 14 inserted 30 March 2021 section 14(1) section 14(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
CD: Income from equity
Contents
Income
CD 1: Dividend
Income
1: A dividend derived by a person is income of the person. Timing of income: dividends other than non-cash dividends
2: The income is allocated to the income year in which the person receives the dividend if the dividend is a dividend other than a non-cash dividend. Exception: certain dividends derived by dual resident companies
3: Despite subsection (2), the income is allocated to the income year of the person in which the DRCD deferral date falls if the dividend—
a: is derived by a New Zealand resident company that is treated under a double tax agreement as not being resident in New Zealand; and
b: meets the requirements set out in section CW 10(1)(b) to (d), (5), and (6) company dividend double tax agreement DRCD deferral date income income year New Zealand resident non-cash dividend resident in New Zealand 2004 No 35 s CD 1 Section CD 1(1) heading inserted 30 March 2021 section 15(1) section 15(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CD 1(2) heading inserted 30 March 2021 section 15(2) section 15(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CD 1(2) inserted 30 March 2021 section 15(2) section 15(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CD 1(3) heading inserted 31 March 2023 section 10(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 1(3) inserted 31 March 2023 section 10(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 1 list of defined terms company inserted 31 March 2023 section 10(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 1 list of defined terms double tax agreement inserted 31 March 2023 section 10(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 1 list of defined terms DRCD deferral date inserted 31 March 2023 section 10(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 1 list of defined terms income year inserted 30 March 2021 section 15(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CD 1 list of defined terms New Zealand resident inserted 31 March 2023 section 10(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 1 list of defined terms non-cash dividend inserted 30 March 2021 section 15(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CD 1 list of defined terms resident in New Zealand inserted 31 March 2023 section 10(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CD 2: Distribution excluded from being dividend
A distribution, derived by a member of a co-operative company, that is excluded by section CD 34B or CZ 41 co-operative company dividend income 2004 No 35 s CD 1B Section CD 2 amended 28 March 2024 section 13 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CD 2 amended 7 September 2010 section 7 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 What is a dividend?
CD 3: Meaning of dividend
Sections CD 4 to CD 20 dividend dividend 2004 No 35 s CD 2 Section CD 3 amended 18 March 2019 section 128 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
CD 4: Transfers of company value Transfers of company value
1: A transfer of company value
a: the cause of the transfer is a shareholding in the company, as described in section CD 6
b: none of the exclusions in sections CD 22 to CD 37 Calculation rules
2: Sections CD 38 to CD 42 company dividend transfer of company value 2004 No 35 s CD 3 Section CD 4 heading amended 23 March 2020 section 88(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 4(1) heading amended 23 March 2020 section 88(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 4(1) amended 23 March 2020 section 88(3) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 4 list of defined terms transfer of company value inserted 23 March 2020 section 88(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 4 list of defined terms transfer of value repealed 23 March 2020 section 88(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CD 5: What is a
transfer of company value General test
1: A transfer of company 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 46C(4) remitted
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 46C(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 or the shareholder’s rights Provision of services for less than market value
3: Despite subsection (1), a transfer of company value 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 company value wholly-owned group of companies 2004 No 35 s CD 4 Section CD 5 heading amended 23 March 2020 section 89(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 5(1) amended 23 March 2020 section 89(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 5(2) replaced 30 March 2017 section 16(1) section 16(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 5(2)(a) amended 30 March 2022 section 51 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CD 5(2)(a) amended 18 March 2019 section 129(1) section 129(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CD 5(2B) heading inserted 6 October 2009 section 12(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 5(2B) inserted 6 October 2009 section 12(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 5(2B) amended 29 March 2018 section 9(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 5(3) amended 23 March 2020 section 89(3) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 5 list of defined terms market value inserted 6 October 2009 section 12(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 5 list of defined terms share inserted 6 October 2009 section 12(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 5 list of defined terms shareholder inserted 6 October 2009 section 12(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 5 list of defined terms transfer of company value inserted 23 March 2020 section 89(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 5 list of defined terms transfer of value repealed 23 March 2020 section 89(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 5 list of defined terms wholly-owned group of companies inserted 30 March 2017 section 16(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CD 6: When is a transfer caused by a shareholding relationship?
General test
1: A transfer of company value recipient
a: the recipient at any relevant time—
i: holds shares in the company; or
ii: is associated with a shareholder; and
iii:
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 company value
a: the transfer is a cash distribution; and
b: the distribution is a deduction under section DV 19
c: the board does not choose to treat the distribution as a dividend under section OB 73 Deductible distributions of co-operative companies
4: Despite subsection (1), a transfer of company value
a: the transfer is a cash distribution; and
b: the distribution is a deduction under section DV 19
c: the company does not choose to treat the distribution as a dividend under section OB 82 Relationship with sections DV 18 and DV 19
5: For the purposes of subsections (3)(b) and (4)(b), section DV 19 section DV 18 arrangement associated person company co-operative company deduction share shareholder statutory producer board transfer of company value trustee 2004 No 35 s CD 5 Section CD 6(1) amended 23 March 2020 section 90(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 6(1)(a)(ii) amended 1 April 2010 section 13(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 6(1)(a)(iii) repealed 1 April 2010 section 13(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 6(3) amended 23 March 2020 section 90(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 6(3)(b) amended 18 March 2019 section 130(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CD 6(4) amended 23 March 2020 section 90(3) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 6(4)(b) amended 18 March 2019 section 130(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CD 6(5) heading amended 18 March 2019 section 130(3)(a) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CD 6(5) amended 18 March 2019 section 130(3)(b) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CD 6 list of defined terms transfer of company value inserted 23 March 2020 section 90(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 6 list of defined terms transfer of value repealed 23 March 2020 section 90(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CD 7: 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 amount bonus issue in lieu dividend pay RWT 2004 No 35 s CD 6 Section CD 7(2) amended 2 November 2012 section 6 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
CD 7B: Shares issued under profit distribution plans
Profit distribution plan shares
1: A share issued by a company under a profit distribution plan is a dividend. Amount of dividend
2: The amount of the dividend is the amount offered by the company for the repurchase of the share. Relationship with section CD 22
3: Section CD 22 amount company dividend profit distribution plan RWT share Section CD 7B inserted 2 November 2012 section 7 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
CD 8: Elections to make bonus issue into dividend
Treating bonus issues as dividends
1: A bonus issue that is not a bonus issue in lieu or a share issued under a profit distribution plan
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
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 pay profit distribution plan share 2004 No 35 s CD 7 Section CD 8(1) amended 2 November 2012 section 8(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CD 8(1)(a)(ii) amended 7 May 2012 section 4(1) Taxation (International Investment and Remedial Matters) Act 2012 Section CD 8 profit distribution plan inserted 2 November 2012 section 8(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CD 8 share inserted 2 November 2012 section 8(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
CD 9: 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 2004 No 35 s CD 7B
CD 10: 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 2004 No 35 s CD 7C
CD 11: Avoidance arrangements
An amount treated as a dividend under any of the following sections is a dividend:
a: section GB 1
b: section GB 23(7)
c: section GB 25 amount close company director dividend relative shareholder 2004 No 35 ss GB 1(3) GD 3(1), (2) GD 5
CD 12: Superannuation schemes entering trust rules
When this section applies
1: This section applies when a superannuation scheme that is treated as a company because it is a unit trust becomes a superannuation fund. Treatment as liquidated
2: The company is treated as liquidated immediately before the date on which the scheme becomes a superannuation fund. company liquidation superannuation fund superannuation scheme 2004 No 35 s HH 1(9)
CD 13: 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 OB 74 Calculation: section OB 75
2: The amount of the dividend is calculated under section OB 75 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 OB 79 Calculation: section OB 80
4: The amount of the dividend is calculated under section OB 80 Corresponding payments not dividends
5: Section CD 33 amount co-operative company dividend imputation credit pay statutory producer board 2004 No 35 s CD 8
CD 14: Notional distributions of emigrating companies
Dividend
1: A notional distribution of an emigrating company under section FL 2 or FL 3 Amount of dividend
2: The amount of the dividend is determined by a shareholder’s entitlement in the circumstances set out in section FL 2 or FL 3 amount dividend emigrating company shareholder 2004 No 35 s FCB 2(b) Section CD 14(1) amended 31 March 2023 section 11(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 14(2) amended 31 March 2023 section 11(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CD 15: Tax credits linked to dividends
Imputation credits and withholding taxes
1: The amount of a dividend includes—
a: an imputation credit attached to the dividend subject to any limitation to the imputation credit made under section LE 5
b: an amount of RWT or NRWT, as applicable, withheld from or paid in relation to the dividend. Relationship with sections CD 16 and CD 17
2: Subsection (1) is overridden by sections CD 16 CD 17 When subsection (1) does not apply
3: Subsection (1) does not apply in—
a: Part L subpart LP
b: Part M
c: Part O
d: Part R Beneficiary income
3B: Despite subsection (1)(b) and for the purposes of section HC 6 section HC 6(2)(c) Arrangement for dividend from another company
4: Section GB 37 amount arrangement dividend imputation credit income NRWT pay RWT RWT substitution payment tax tax credit 2004 No 35 s CD 9 Section CD 15(1) heading replaced 29 March 2018 section 10(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 15(1) replaced 29 March 2018 section 10(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 15(1)(a) amended 31 March 2023 section 12(1) section 12(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 15(3B) heading inserted 29 March 2018 section 10(2) section 10(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 15(3B) inserted 29 March 2018 section 10(2) section 10(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 15 list of defined terms FDP credit repealed 1 April 2017 section 17(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 15 list of defined terms NRWT inserted 29 March 2018 section 10(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 15 list of defined terms pay inserted 29 March 2018 section 10(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 15 list of defined terms RWT inserted 29 March 2018 section 10(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 15 list of defined terms RWT substitution payment inserted 29 March 2018 section 10(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 15 list of defined terms tax credit inserted 29 March 2018 section 10(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CD 16: 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 FA 3
3: To the extent to which subsection (2) applies, section FA 3 Some definitions
4: In this section,— 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 imputation credit pay tax unit trust unit trust manager 2004 No 35 s CD 10 Section CD 16(4) imputation credit repealed 1 April 2017 section 18(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 16 list of defined terms FDP credit repealed 1 April 2017 section 18(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CD 17: Credit transfer notice
When this section applies
1: This section applies when 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. Meaning of imputation credit
4: amount credit transfer notice dividend imputation credit original share share-lending arrangement share supplier share user 2004 No 35 s CD 10B Section CD 17(4) heading repealed 1 April 2017 section 19(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 17(4) repealed 1 April 2017 section 19(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 17 list of defined terms FDP credit repealed 1 April 2017 section 19(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CD 18: Dividend reduced if foreign tax paid on company’s income
When this section applies
1: This section applies when 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, in 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 the country or territory
b: earlier reductions Commissioner company dividend foreign company income income tax New Zealand pay request 2004 No 35 s CD 10C Section CD 18(3)(a) amended 24 February 2016 section 73 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 18 list of defined terms request inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
CD 19: 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 2004 No 35 s CD 11
CD 20: 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 17(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 17(2)
b: section CD 32 Meaning of non-executive director
4: In this section, non-executive director company director dividend employee fringe benefit non-executive director shareholder unclassified benefit 2004 No 35 s CD 12
CD 21: Attributed repatriations from controlled foreign companies
Section CD 21 repealed 6 October 2009 section 14(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 What is not a dividend?
CD 22: Returns of capital: off-market share cancellations
When this section applies
1: This section applies when 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 anti-avoidance rule in subsection (6)). Calculation concessions for foreign unlisted widely-held 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 shareholder had the share not been issued, if the share is a taxable bonus issue under paragraph (d) of the definition of the term. 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 or de facto partner, or minor child of the shareholder, or a trustee of a trust under which a spouse, civil union partner or de facto partner, or minor child of the shareholder has benefited or is eligible to benefit 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 Companies Act 1993
ii: issued under 1 of New Zealand’s Acts relating to co-operative companies; or
iii: subject to sections FA 2 FZ 1 or section FA 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 decision-making rights in relation to the share except—
i: a protective right; or
ii: if the company is subject to 1 of New Zealand’s Acts 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 fifteen 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 right slice rule taxable bonus issue ten percent capital reduction trustee unit trust unlisted trust unlisted widely-held trust widely-held trust 2004 No 35 s CD 14 Section CD 22(9) counted associate amended 1 April 2010 section 15(1)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 22(9) non-participating redeemable share amended 6 October 2009 section 15(1)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 23: Ordering rule and slice rule
Ordering rule
1: Under the ordering rule available subscribed capital of class ÷ shares being cancelled of class. Definition of items in formula
2: In the formula in subsection (1),—
a: available subscribed capital of class
b: shares being cancelled of class Slice rule
3: Under the slice rule available subscribed capital of class ÷ shares of class. Definition of items in formula
4: In the formula in subsection (3),—
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 2004 No 35 s CD 15
CD 23B: Returns of capital: shares repurchased under profit distribution plans
When this section applies
1: This section applies when a company has issued a share to a shareholder under a profit distribution plan and the shareholder exercises the option to have the share repurchased by the company. Amount paid
2: The amount paid by the company to repurchase the share is not a dividend. amount company dividend pay profit distribution plan share shareholder Section CD 23B inserted 2 November 2012 section 9 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
CD 24: 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 40
ii: section CD 43(2)(c)
iii: section GA 1(4)
b: gives rise to an imputation credit account debit under section OB 42 amount available subscribed capital company dividend imputation credit account on-market cancellation ordering rule pay share 2004 No 35 s CD 16 Section CD 24(2)(a)(i) amended 21 December 2010 section 28(1) Taxation (GST and Remedial Matters) Act 2010
CD 25: 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 shares acquired by the company are held by the company in itself, including shares acquired by the company as the result of the application of section CE 6 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) or section CD 17(1)
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 and has failed to allocate a share or right to a share, of the same class to an employee share scheme beneficiary under an employee share scheme, 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, in the case of the first anniversary, calculated 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 OB 42 ASC per share excess section OB 42 Relief from imputation penalty tax
6: No imputation penalty tax is imposed under section 140B Employee share schemes
7: For the purposes of subsection (2), if the company has, before the first anniversary, allocated a share or right to a share to an employee share scheme beneficiary under an employee share scheme but subsequently the allocation is cancelled, the shares acquired under subsection (1) by the company are treated as acquired by the company on the date of cancellation for the amount the company paid for their acquisition under subsection (1). agent amount arrangement associated person available subscribed capital cancellation company co-operative company dividend employee share scheme employee share scheme beneficiary imputation credit account imputation penalty tax New Zealand on-market cancellation ordering rule pay pro rata cancellation recognised exchange share shareholder 2004 No 35 s CD 17 Section CD 25(1)(a) replaced 29 September 2018 section 11(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 25(2)(b) replaced 29 September 2018 section 11(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 25(4) substituted 6 October 2009 section 16(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 25(7) heading inserted 29 September 2018 section 11(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 25(7) inserted 29 September 2018 section 11(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 25 list of defined terms employee share scheme inserted 29 September 2018 section 11(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 25 list of defined terms employee share scheme beneficiary inserted 29 September 2018 section 11(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CD 26: Capital distributions on liquidation or emigration
When this section applies
1: This section applies when a shareholder—
a: is paid an amount in relation to a share on the liquidation of the company:
b: is treated under section FL 2 or FL 3 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 44 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 2004 No 35 s CD 18 Section CD 26(1)(b) amended 31 March 2023 section 13 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CD 27: Property made available intra-group
When this section applies
1: This section applies when—
a: a transfer of company value first company associated company
b: in the absence of this section, the transfer would be a dividend under section CD 6(1)(a)(ii) Intra-group property arrangements worth $10,000 or less
2: The transfer of company value
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 income year of the first company in which the transfer occurs, the total amount of transfers of company value Downward transfers of company value
3: The transfer of company value
a: either—
i: the first company has a voting interest in the associated company; or
ii: the first company is associated with a company (the parent company transfer of company value
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 relation to 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 relation to either the first company or the associated company, a market value interest in the associated company, of more than 10%. Relationship with section FA 3
4: Subsection (3) does not apply to a transfer of company value section FA 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 YC 4
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 rule in section YC 4
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 rule in section YC 4
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 income year loan market value circumstance market value interest non-resident passive income shareholder tax year transfer of company value trustee voting interest 2004 No 35 s CD 19 Section CD 27(1)(a) amended 23 March 2020 section 91(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 27(1)(b) substituted 1 April 2010 section 17(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 27(2) amended 23 March 2020 section 91(2)(a) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 27(2)(c) amended 23 March 2020 section 91(2)(b) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 27(3) heading amended 23 March 2020 section 91(3)(a) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 27(3) amended 23 March 2020 section 91(3)(b) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 27(3)(a)(ii) substituted 6 October 2009 section 17(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 27(3)(a)(ii) amended 23 March 2020 section 91(3)(c) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 27(4) amended 23 March 2020 section 91(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 27 list of defined terms FDP repealed 6 October 2009 section 17(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 27 list of defined terms transfer of company value inserted 23 March 2020 section 91(5) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 27 list of defined terms transfer of value repealed 23 March 2020 section 91(5) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CD 28: Transfers of certain excepted financial arrangements within wholly-owned groups
When section ED 2 dividend excepted financial arrangement wholly-owned group of companies 2004 No 35 s CD 20
CD 29: Non-taxable bonus issues
A non-taxable bonus issue is not a dividend. dividend non-taxable bonus issue 2004 No 35 s CD 21
CD 29B: 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 or otherwise dispose of 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 pay share shareholder Section CD 29B inserted 17 July 2013 section 8(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CD 29B(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CD 29C: Transfers to shareholders by ASX-listed Australian company of shares in subsidiary
A transfer of company value section ED 2B(7) dividend transfer of company value Section CD 29C replaced 18 March 2019 section 131(1) section 131(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CD 29C amended 23 March 2020 section 92(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 29C list of defined terms transfer of company value inserted 23 March 2020 section 92(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 29C list of defined terms transfer of value repealed 23 March 2020 section 92(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CD 30: Transfer by unit trust of legal interest after beneficial interest vests
If money or property of a unit trust is a dividend under section CD 9 dividend unit holder unit trust 2004 No 35 s CD 21B
CD 31: 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 2004 No 35 s CD 22
CD 32: Employee benefits
FBT rules
1: A benefit provided to an employee is not a dividend if—
a: it is a fringe benefit subject to fringe benefit tax; or
b: it would be a fringe benefit subject to fringe benefit tax if an election had not been made under section CX 17(4B) Board
2: An amount that is employment income under section CE 1B amount dividend employee employment income FBT rules fringe benefit fringe benefit tax 2004 No 35 s CD 23 Section CD 32(1) replaced 1 April 2017 section 65(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CD 32(2) amended 1 April 2015 section 12 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 32 list of defined terms employee inserted 1 April 2017 section 65(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017
CD 33: 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 an income year is not a dividend if—
a: the person was a member of the board at some time during the income 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 income year; or
ii: the total levies payable by members to the board for the income year; and
c: the amount corresponds to a notional distribution amount treated as a dividend under section CD 13(1) Co-operative company payments
2: An amount paid by a co-operative company to a person in relation to an income year is not a dividend if—
a: the person was a shareholder of the company at some time during the income 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 income year; and
c: the amount corresponds to a notional distribution amount treated as a dividend under section CD 13(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 income year levy member pay produce transactions producer board shareholder statutory producer board 2004 No 35 s CD 24
CD 34: Distribution to member of co-operative company based on member’s transactions
Section CD 34 repealed 7 September 2010 section 8 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CD 34B: Distributions to members of co-operative companies
What this section applies to
1: This section applies to a distribution by a co-operative company, or by a company (a subsidiary
a: the distribution is made after the co-operative company has notified the Commissioner that they have elected to apply this section; and
b: the election has not been revoked. Exclusion
1B: Despite subsection (1), this section does not apply to a distribution to which section CZ 41 General rule: co-operative company distributions not dividends
2: If the requirements in subsection (4) are met, a distribution by a co-operative company, or by a subsidiary, to a member of the co-operative company is not a dividend, to the extent to which the distribution is for their—
a: transaction shares:
b: projected transactions shareholding:
c: limited non-transaction shares. Exception: distributions for excess shareholdings
3: Subsection (2)(c) is ignored,—
a: for a distribution to a member, if the member holds shares in the co-operative company that—
i: are not transaction shares, are not their projected transactions shareholding, and are not limited non-transaction shares; and
ii: may entitle members to enter trading transactions:
b: for all distributions to all members, if the constitution of the co-operative company permits any member to hold shares that—
i: are not transaction shares, are not their projected transaction shareholding, and are not limited non-transaction shares; and
ii: may entitle members to enter trading transactions. Requirements
4: For the purposes of subsection (2), the requirements are—
a: the co-operative company is resident in New Zealand for the period to which the distribution relates; and
b: the company making the distribution is resident in New Zealand for the period to which the 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. Meaning of transaction shares
5: In this section, transaction shares Meaning of limited non-transaction shares
6: In this section, limited non-transaction shares
a: 20% of the member's transaction shares on the date of entitlement for the distribution under section 125
b: 20% of the member's projected transactions shareholding on the date of entitlement for the distribution under section 125 Meaning of projected transactions shareholding
7: In this section, projected transactions shareholding Meaning of trading transactions
8: In this section, trading transactions
a: the disposal and acquisition
b: not subject to section CB 2 Companies Act 1993
9: The 20 working day rule for fixing a date in section 125(2)
a: the co-operative company or the subsidiary, as the case may be, has given a copy of the election described in subsection (1) to the Registrar of Companies before the relevant distributions are paid; and
b: for the purposes of section 125(1) Commissioner company co-operative company dividend limited non-transaction shares notify projected transaction shareholding resident in New Zealand share trading stock trading transactions transaction shares Section CD 34B inserted 7 September 2010 section 9 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CD 34B(1)(a) replaced 2 June 2016 section 7(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CD 34B(1B) heading inserted 28 March 2024 section 14 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CD 34B(1B) inserted 28 March 2024 section 14 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CD 34B(8)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 34B list of defined terms notify inserted 2 June 2016 section 7(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
CD 35: Resident’s restricted amalgamations
An amount derived by an amalgamated company on a resident’s restricted amalgamation from an amalgamating company that ends its existence 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 resident’s restricted amalgamation 2004 No 35 s CD 25
CD 36: 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 if the company had not been liquidated; and
b: the person calculates their foreign investment fund (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; and
c:
d: the amount is excluded income under section CX 57B Exclusion for interests in FIFs resident in Australia
2: Subsection (1)(b)(iv) does not apply if the person's interest in the company is included, at the beginning of the income year in which the payment is made, in a direct income interest of 10% or more in a FIF that, at the beginning of the income year,—
a: meets the requirements of section EX 35(b)(i) to (iii)
b: does not have its liability for income tax reduced by an exemption, allowance, or relief referred to in section EX 35(c)(i) or (ii) ; and
c: is not a unit trust or is a unit trust subject under Australian law to income tax on its income in the same way as a company. 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 PIE equivalent. Distribution by Australian unit trust of funds from attributing interest in a foreign investment fund
4: An amount paid by a CFC to a person (the CFC distribution
a: if the CFC—
i: is a unit trust that is not subject under Australian law to income tax on its income in the same way as a company; and
ii: has an interest in a foreign investment fund (the FIF
b: if the interest of the CFC in the FIF is an attributing interest of the person (the indirect FIF interest section EX 59(1)
c: to the extent to which the CFC distribution is funded directly or indirectly from the indirect FIF interest. amount attributing interest company comparative value method cost method deemed rate of return method direct income interest dividend excluded income fair dividend rate method FIF income foreign investment fund foreign PIE equivalent income year life insurance liquidation loss pay portfolio investment entity 2004 No 35 s CD 26 Section CD 36(1) heading inserted 6 October 2009 section 19(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 36(1)(b) substituted 1 April 2008 section 315(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CD 36(1)(b)(iv) amended 29 March 2018 section 13(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 36(1)(c) repealed 6 October 2009 section 19(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 36(1)(d) inserted 29 March 2018 section 13(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 36(2) heading replaced 7 May 2012 section 5(1) Taxation (International Investment and Remedial Matters) Act 2012 Section CD 36(2) replaced 7 May 2012 section 5(1) Taxation (International Investment and Remedial Matters) Act 2012 Section CD 36(2)(b) amended 31 March 2023 section 14(1)(a) section 14(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 36(2)(c) inserted 31 March 2023 section 14(1)(b) section 14(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 36(3) heading added 6 October 2009 section 19(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 36(3) added 6 October 2009 section 19(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 36(3)(b) substituted 1 April 2010 section 19(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 36(4) heading inserted 1 April 2023 section 14(2) section 14(4) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 36(4) inserted 1 April 2023 section 14(2) section 14(4) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 36 list of defined terms direct income interest inserted 6 October 2009 section 19(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 36 list of defined terms excluded income inserted 29 March 2018 section 13(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 36 list of defined terms foreign investment vehicle repealed 1 April 2010 section 19(6) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 36 list of defined terms foreign PIE equivalent inserted 1 April 2010 section 19(6) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 36 list of defined terms grey list company repealed (with effect on 1 July 2011) 7 May 2012 section 5(2) Taxation (International Investment and Remedial Matters) Act 2012 Section CD 36 list of defined terms income year inserted 1 April 2008 section 315(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CD 36 list of defined terms life insurance inserted 6 October 2009 section 19(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 36 list of defined terms portfolio investment entity added 6 October 2009 section 19(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 36B: Foreign superannuation withdrawals and pensions from foreign superannuation scheme
An amount paid to a person by a company that is a foreign superannuation scheme is not a dividend if the person derives the amount as a—
a: foreign superannuation withdrawal:
b: pension. company dividend foreign superannuation withdrawal Section CD 36B inserted 1 April 2014 section 6 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CD 37: Maori authority distributions
A Maori authority distribution is not a dividend except for the purposes of section CW 10 dividend Maori authority wholly-owned group 2004 No 35 s HI 4(2) Calculation rules
CD 38: General calculation rule for
transfers of company value Difference in value
1: The amount of a dividend that is a transfer of company value 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. To the extent to which the person provides a loan that is cross-border related borrowing under section GC 6(3B) sections GC 6 to GC 18
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 39 to CD 42
3: This section is overridden by sections CD 39 to CD 42 amount company dividend shareholder transfer of company value 2004 No 35 s CD 27 Section CD 38 heading amended 23 March 2020 section 93(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 38(1) amended 23 March 2020 section 93(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 38(2)(b)(i) replaced 1 April 2022 section 52(1) section 52(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CD 38 list of defined terms transfer of company value inserted 23 March 2020 section 93(3) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CD 38 list of defined terms transfer of value repealed 23 March 2020 section 93(3) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CD 39: 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 fringe benefit tax (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 38
b: the company were not to choose to pay fringe benefit tax on an income year basis under section RD 60 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 an earlier tax year; and
c: the amount payable by the company is—
i: payable without any amount of tax being withheld and paid under the PAYE rules, the RWT rules, or the NRWT rules:
ii: a fully imputed 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: When loan disregarded
14: accounting period amount amount of tax CFC Commissioner company dividend employee extra pay FBT rules fringe benefit fringe benefit tax fully imputed income income year interest loan New Zealand notice notify NRWT rules pay PAYE rules prescribed rate of interest quarter return of income RWT rules shareholder tax year variable principal debt instrument 2004 No 35 s CD 28 Section CD 39(9)(c) replaced 30 March 2017 section 20(1) section 20(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 39(9)(c)(ii) amended 29 March 2018 section 14(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 39(13) heading repealed 24 February 2016 section 74(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 39(13) repealed 24 February 2016 section 74(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 39(14) heading repealed 24 February 2016 section 74(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 39(14) repealed 24 February 2016 section 74(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 39 list of defined terms attributed repatriation repealed 24 February 2016 section 74(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 39 list of defined terms fully-imputed dividend repealed 29 March 2018 section 14(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 39 list of defined terms fully imputed inserted 29 March 2018 section 14(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 39 list of defined terms New Zealand repatriation amount repealed 24 February 2016 section 74(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CD 40: 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
b: the resulting refunds are made. Amendment of assessments
2: Section 113B Refunds
3: If the Commissioner has been notified of the recovery and has amended an assessment as described in subsection (2),
a: income tax of the shareholder; and
b: non-resident withholding tax (NRWT) or resident withholding tax (RWT) of the company. Relationship with subpart RM
4: The refund is made despite sections RM 2 to RM 5 RM 18 to RM 21 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 (ICA) company, the imputation credit account of the shareholder. assessment Commissioner company dividend ICA company imputation credit imputation credit account imputation rules income tax notice notify NRWT NRWT rules RWT RWT rules shareholder 2004 No 35 s CD 29 Section CD 40(1)(a) amended 1 April 2017 section 21(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 40(2) replaced 30 June 2014 section 13(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 40(2) amended 1 April 2017 section 21(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 40(3) amended 30 June 2014 section 13(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 40(3)(a) replaced 1 April 2017 section 21(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 40(4) amended 17 July 2013 section 9 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CD 40(5) amended 30 June 2014 section 13(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 40(5)(b) replaced 1 April 2017 section 21(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 40 list of defined terms FDP repealed 1 April 2017 section 21(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 40 list of defined terms FDP account repealed 1 April 2017 section 21(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 40 list of defined terms FDP credit repealed 1 April 2017 section 21(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 40 list of defined terms FDP penalty tax repealed 1 April 2017 section 21(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 40 list of defined terms FDP rules repealed 1 April 2017 section 21(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 40 list of defined terms FDPA company repealed 1 April 2017 section 21(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 40 list of defined terms imputation rules inserted 30 June 2014 section 13(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 40 list of defined terms notify inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CD 40 list of defined terms NRWT rules inserted 30 June 2014 section 13(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 40 list of defined terms RWT rules inserted 30 June 2014 section 13(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CD 41: 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 sections RM 2 to RM 5
5: The refund is made despite sections RM 2 to RM 5 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 (as it applied before 1 April 1992 to give the Commissioner a discretion to treat loans as dividends), as if the amount repaid were a released amount that is repaid. amount assessment close company Commissioner company dividend notice pay shareholder tax 2004 No 35 s CD 30 Section CD 41(5) heading amended 17 July 2013 section 10(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CD 41(5) amended 17 July 2013 section 10(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CD 42: 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 2004 No 35 s CD 31
CD 43: Available subscribed capital (ASC) amount
Formula for calculating amount of available subscribed capital
1: For a share (the share calculation time available subscribed capital 1 July 1994 balance + subscriptions − returns − look-through company returns Definition of items in formula
2: In the formula in subsection (1),—
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 class the share, ignoring section HB 1 section CE 6
c: returns (22) to (25) section CD 22 CD 23B CD 24 Act:
d: look-through company returns section HB 1 1 July 1994 balance
3: The 1 July 1994 balance is calculated using the formula— ((paid-up capital + premiums) ÷ all shares issued) × 30 June 1994 shares. Definition of items in formula
4: In the formula in subsection (3),—
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
ab: in the case of a share issued under a profit distribution plan, the amount offered by the company for the repurchase of the share; and
b: in the case of a taxable bonus issue that is not a bonus issue in lieu or a share issued under a profit distribution plan
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. When subsection (6D) applies
6B: Subsection (6D) applies for a company (the calculation company
a: section EW 46C(1)(a) or (b) remitted
b:
c: section EW 46C(3)
d: the calculation company is the debtor, or the calculation company holds, before section YC 4 When subsection (6D) applies
6C: Subsection (6D) also applies if section EW 46C(1)(c) calculation company
a: is the creditor’s debtor, to whom section EW 46C(1)(c)
b: has, before the application of section YC 4 section EW 46C(1)(c) section EW 46C(1)(c) Subscriptions amount: debt remitted
6D: For the calculation company, the subscriptions amount is treated as including the amount of debt to which section EW 46C(5) section EW 46C(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 YC 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. Subscriptions amount increase: employee share scheme
6E: Unless subsection (6F) applies, when the company is part of an employee share scheme, the subscriptions amount includes, in addition to any amount under subsection (2)(b), the following amounts:
a: if the company has a deduction under section DV 27(6) employer company
i: for shares of the same class as the shares issued under the employee share scheme by the employer company; or
ii: if the employer company does not issue shares under the employee share scheme, for shares of the class most similar to the shares issued under the employee share scheme:
b: the subscriptions amount for shares of the same class as the shares issued by the company under the employee share scheme (the issuer company section DV 27(6)
i: the issuer company is not the employer company; and
ii: the company is a member of a wholly-owned group of companies of which the employer company is a member; and
iii: before the application of section YC 4 Exception to subsection (6E) by election
6F: Subsection (6E) does not apply if—
a: the shares issued under the employee share scheme are issued for market value or a reasonable estimate of market value; and
b: the company elects to apply this subsection. Formula: employer companies
6G: For the purposes of subsection (6E)(a), the amount is calculated using the formula— subscription amount − consideration paid. Definition of items in formula
6H: In the formula in subsection (6G),—
a: subscription amount section DV 27(6)
b: consideration paid payee company Employer companies’ negative amounts
6I: If the amount calculated using the formula in subsection (6G) is negative, then the absolute value of the amount is subtracted from the company’s subscriptions amount for the issue of shares of the class most similar to the shares issued under the employee share scheme. Formula: employer companies’ negative amounts
6J: If the amount calculated using the formula in subsection (6G) is negative, then a positive amount calculated using the formula in this subsection is a dividend paid by the company to the payee company— formula amount − ASC. Definition of items in formula
6K: In the formula in subsection (6J),—
a: formula amount
b: ASC Subscriptions amount: exclusions for bonus issues
7: The subscriptions amount does not include—
a: an amount for a bonus issue if none of subsection (6)(a), (ab), or (b) applies:
ab: an amount for an imputation credit attached to the dividend arising from a taxable bonus issue if subsection (6)(b) applies:
b: an amount for a taxable bonus issue made to a shareholder to whom the bonus issue was exempt income under section CW 9 CW 10 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:
iii: to the extent to which the dividend is not fully credited; or
b: an amount received by the company if the amount is mainly attributable, directly or indirectly, to the payment by the company of a dividend to a controlled foreign company at a time when the company is also a controlled foreign company, regardless of whether either company is a grey list company or non-attributing Australian CFC. 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 measured in section IC 3(3) to (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
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 (the 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
16: If a company has been treated under section FL 2 or FL 3 Subscriptions amount: Maori authority
17: 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
18: The subscriptions amount does not include amounts included in calculating the 1 July 1994 balance. Subscriptions amount: treasury stock disposals
19: 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 25 Subscriptions amount: superannuation fund’s interest in GIF
20: 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. Subscriptions amount exclusion: employee share scheme
20B: The subscriptions amount does not include an amount of consideration that the company received for the issue of shares, if the payer of the consideration for the issue of shares is a member of the same wholly-owned group of companies as the company, and the company has, before the application of section YC 4 1 July 1994 and subscriptions amount: foreign currency conversions
21: 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
22: If the acquisition of a share by an associate of the company is within the meaning of an acquisition under paragraph (d) of the definition of on-market cancellation Returns amount: recovered amounts
23: 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
24: 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 × asc per share. Definition of items in formula
25: In the formula in subsection (24),—
a: cancelled shares
b: asc per share Meaning of fully credited
26: In this section, the part of a dividend that is fully credited dividend excluding credits × actual ratio ÷ maximum ratio. Definition of items in formula
27: In the formula in subsection (26),—
a: dividend excluding credits
b: actual ratio section OZ 13
c: maximum ratio section OA 18 Meaning of qualifying share premium
28: 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. Subscriptions amount decrease: employee share scheme
29: An amount equal to the amount of the company’s income under section CV 20
a: for shares of the same class as the shares issued under the employee share scheme by the company; or
b: if the company does not issue shares under the employee share scheme, for shares of the class most similar to the shares issued under the employee share scheme. 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 deduction dividend employee employee share scheme exempt income fully credited grey list company group investment fund imputation credit imputation ratio look-through company market value circumstance market value interest Maori authority New Zealand non-attributing Australian CFC non-resident company on-market cancellation pay profit distribution plan qualifying share premium share shareholder shares of the same class slice rule superannuation fund tax year taxable bonus issue taxable income voting interest wholly-owned group of companies 2004 No 35 s CD 32 Section CD 43(1) formula amended 1 April 2011 section 29(1) Taxation (GST and Remedial Matters) Act 2010 Section CD 43(2)(b) amended 30 March 2021 section 16 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CD 43(2)(b) amended 1 April 2011 section 29(2) Taxation (GST and Remedial Matters) Act 2010 Section CD 43(2)(c) amended 29 March 2025 section 11(1) section 11(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CD 43(2)(c) amended 2 November 2012 section 10(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CD 43(2)(c) amended 1 April 2011 section 29(3) Taxation (GST and Remedial Matters) Act 2010 Section CD 43(2)(d) added 1 April 2011 section 29(3) Taxation (GST and Remedial Matters) Act 2010 Section CD 43(6)(ab) inserted 2 November 2012 section 10(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CD 43(6)(b) amended 2 November 2012 section 10(3) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CD 43(6B) heading inserted 30 March 2017 section 22(1) section 22(10) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(6B) inserted 30 March 2017 section 22(1) section 22(10) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(6B)(a) amended 30 March 2022 section 53(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CD 43(6B)(b) repealed 30 March 2022 section 53(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CD 43(6C) heading inserted 30 March 2017 section 22(1) section 22(10) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(6C) inserted 30 March 2017 section 22(1) section 22(10) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(6D) heading inserted 30 March 2017 section 22(1) section 22(10) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(6D) heading amended 30 March 2022 section 53(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CD 43(6D) inserted 30 March 2017 section 22(1) section 22(10) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(6E) heading inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6E) inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6F) heading inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6F) inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6G) heading inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6G) inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6H) heading inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6H) inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6I) heading inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6I) inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6J) heading inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6J) inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6K) heading inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(6K) inserted 29 September 2018 section 15(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(7) heading replaced 30 March 2017 section 22(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(7)(a) amended 30 March 2017 section 22(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(7)(a) amended 2 November 2012 section 10(4) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CD 43(7)(ab) inserted 30 March 2017 section 22(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(8)(a)(ii) repealed 1 April 2017 section 22(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(8)(b) substituted 6 October 2009 section 20(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 43(9)(b) amended 7 September 2010 section 10(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CD 43(16) amended 31 March 2023 section 15 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CD 43(19) heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 43(20B) heading inserted 29 September 2018 section 15(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(20B) inserted 29 September 2018 section 15(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(27)(a) amended 1 April 2017 section 22(6) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(27)(b) replaced 1 April 2017 section 22(7) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43(29) heading inserted 29 September 2018 section 15(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43(29) inserted 29 September 2018 section 15(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43 list of defined terms consideration inserted 6 October 2009 section 20(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 43 list of defined terms deduction inserted 29 September 2018 section 15(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43 list of defined terms employee inserted 29 September 2018 section 15(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43 list of defined terms employee share scheme inserted 29 September 2018 section 15(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 43 list of defined terms FDP repealed 1 April 2017 section 22(8) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43 list of defined terms FDP credit repealed 1 April 2017 section 22(8) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43 list of defined terms FDP ratio repealed 1 April 2017 section 22(8) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43 list of defined terms look-through company inserted 1 April 2011 section 29(4) Taxation (GST and Remedial Matters) Act 2010 Section CD 43 list of defined terms market value circumstance inserted 30 March 2017 section 22(9) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43 list of defined terms market value interest inserted 30 March 2017 section 22(9) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43 list of defined terms non-attributing Australian CFC inserted 6 October 2009 section 20(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 43 list of defined terms non-resident company inserted 30 March 2017 section 22(9) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43 list of defined terms profit distribution plan inserted 2 November 2012 section 10(5) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CD 43 list of defined terms voting interest inserted 30 March 2017 section 22(9) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 43 list of defined terms wholly-owned group of companies inserted 29 September 2018 section 15(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CD 44: Available capital distribution amount
Formula for calculating amount of available capital distribution
1: For a share (the share available capital distribution amount (receipt − asc per share) × (capital gains + Definition of items in formula
2: In the formula,—
a: receipt
b: asc per share
c: capital gains
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 26 DB 27
b: after 31 March 1988, it receives a capital gain, including a gift, and no part is assessable income
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 26(2)(b)
d: an amount is derived by the company that is attributable to a revaluation of livestock in the 1992–93 tax year or a later tax year under section 86D of the Income Tax Act 1976 or section EC 16 EC 20
db: an amount is derived by the company that is attributable to the difference between the consideration for disposal or acquisition of livestock and the value of that livestock under section EC 4C
dc: an amount is derived by the company that is subject to section HC 38(3) section HC 24
e: the amount is described in section CZ 9(1) Disposal of shares received in a share-for-share exchange
7B: A company that sells or transfers to a person that is not associated, for consideration, shares that are capital property, and the shares were received by the company in a share-for-share exchange to which section CD 43(9) and (10) 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 ends its existence 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 remitted
8B: The amount of a debt to which section EW 46C remitted section CD 43(6D) Capital gain amount: FIF income calculated using fair dividend rate or cost methods
8C: A company derives a capital gain amount for the purposes of this section in relation to an attributing interest in a FIF for which the company uses the fair dividend rate method or the cost method to calculate their FIF income for a period. The capital gain amount is an amount equal to the greater of—
a: the total amount of dividends and gains on disposal derived from the interest in the period that is excluded income under section CX 57B
b: zero. Gains on disposal
8D: For the purposes of subsection (8C)(a), a gain on disposal is the difference between the consideration on disposal of the interest and the cost of acquisition of the interest. 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: for property that is a building for which no depreciation loss arises under section EE 48(2) and (3)
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
9BA: 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: herd scheme
9B: For the purposes of this section, a company incurs a capital loss if it incurs a loss that is attributable to the difference between the consideration for disposal or acquisition of livestock and the value of that livestock under section EC 4C 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 cost Company common interest transactions
10B: An amount derived or incurred by a company ( company A property company B
a: at the time of the disposal, a group of persons holds, for companies A and B,—
i: common voting interests that add up to at least 85%; and
ii: if a market value circumstance exists for company A or company B, common market value interests that add up to at least 85%; and
b: on the liquidation of company A, the aggregate total given by applying the formula in subsection (10C) for all companies that own part of the property ( owning companies Formula
10C: For the purposes of subsection (10B)(b), for an owning company, the formula is— commonality interest × ownership interest. Definition of items in formula
10D: In the formula in subsection (10C),—
a: commonality interest
i: common voting interests; or
ii: if a market value circumstance exists for the owning company or company A, common market value interests, if they are greater than the common voting interests:
b: ownership interest Relationship between subsections
10E: Subsection (10B) Related person transactions
11: Close companies liquidations
12: 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 43(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) Relationship with section CZ 9B
14B: Meaning of related person
15: Look-through relatives and nominees
16: Look-through interposed companies
17: Meaning of capital property
18: In this section, capital property revenue account property, and includes an attributing interest in a FIF for which income is calculated using either the fair dividend rate method or the cost method. adjusted tax value amalgamated company amalgamating company amalgamation amount assessable income attributing interest available capital distribution amount available subscribed capital bonus issue capital property close company company cost method depreciable property dividend fair dividend rate method FIF FIF income group of persons income liquidation market value circumstance market value interest non-taxable bonus issue ordering rule pay relative resident in New Zealand revenue account property share shareholder tax year trustee voting interest 2004 No 35 s CD 33 Section CD 44(7)(b) amended 29 August 2011 section 4(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CD 44(7)(db) inserted 24 February 2016 section 75(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 44(7)(dc) replaced 29 March 2025 section 12(1) section 12(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CD 44(7B) heading inserted 30 March 2022 section 54(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CD 44(7B) inserted 30 March 2022 section 54(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CD 44(8B) heading inserted 30 March 2017 section 23(1) section 23(8) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(8B) heading amended 30 March 2022 section 54(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CD 44(8B) inserted 30 March 2017 section 23(1) section 23(8) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(8B) amended 30 March 2022 section 54(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CD 44(8C) heading inserted 29 March 2018 section 16(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44(8C) inserted 29 March 2018 section 16(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44(8D) heading inserted 29 March 2018 section 16(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44(8D) inserted 29 March 2018 section 16(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44(9) heading replaced 30 March 2017 section 23(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(9) replaced 30 March 2017 section 23(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(9)(a) amended 29 March 2018 section 16(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44(9BA) heading inserted 30 March 2017 section 23(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(9BA) inserted 30 March 2017 section 23(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(9B) heading inserted 24 February 2016 section 75(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 44(9B) inserted 24 February 2016 section 75(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CD 44(10B) heading replaced 30 March 2017 section 23(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(10B) amended 30 March 2017 section 23(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(10B) replaced 30 March 2017 section 23(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(10C) heading replaced 30 March 2017 section 23(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(10C) replaced 30 March 2017 section 23(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(10D) heading inserted 30 March 2017 section 23(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(10D) inserted 30 March 2017 section 23(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(10E) heading inserted 30 March 2017 section 23(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(10E) inserted 30 March 2017 section 23(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(11) heading repealed 1 April 2010 section 21(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44(11) repealed 1 April 2010 section 21(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44(12) heading repealed 1 April 2010 section 21(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44(12) repealed 1 April 2010 section 21(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44(14B) heading repealed 30 March 2017 section 23(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(14B) repealed 30 March 2017 section 23(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44(15) heading repealed 1 April 2010 section 21(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44(15) repealed 1 April 2010 section 21(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44(16) heading repealed 1 April 2010 section 21(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44(16) repealed 1 April 2010 section 21(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44(17) heading repealed 1 April 2010 section 21(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44(17) repealed 1 April 2010 section 21(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44(18) amended 29 March 2018 section 16(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44 list of defined terms adjusted tax value inserted 30 March 2017 section 23(6) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44 list of defined terms assessable income inserted 29 August 2011 section 4(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CD 44 list of defined terms attributing interest inserted 29 March 2018 section 16(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44 list of defined terms cost method inserted 29 March 2018 section 16(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44 list of defined terms depreciable property inserted 30 March 2017 section 23(6) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44 list of defined terms fair dividend rate method inserted 29 March 2018 section 16(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44 list of defined terms FIF inserted 29 March 2018 section 16(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44 list of defined terms FIF income inserted 29 March 2018 section 16(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CD 44 list of defined terms group of persons inserted 30 March 2017 section 23(7) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44 list of defined terms market value circumstance inserted 30 March 2017 section 23(7) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44 list of defined terms market value interest inserted 30 March 2017 section 23(7) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 44 list of defined terms related person repealed 1 April 2010 section 594 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 44 list of defined terms voting interest inserted 30 March 2017 section 23(7) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Attributed repatriation calculation rules Heading repealed 6 October 2009 section 22(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 45: When does a person have attributed repatriation from a controlled foreign company?
Section CD 45 repealed 6 October 2009 section 22(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 46: New Zealand repatriation amount
Section CD 46 repealed 6 October 2009 section 22(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 47: New Zealand property amount
Section CD 47 repealed 6 October 2009 section 22(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 48: Cost of tangible property
Section CD 48 repealed 6 October 2009 section 22(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 49: Cost of associated party equity
Section CD 49 repealed 6 October 2009 section 22(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 50: Outstanding balances of financial arrangements
Section CD 50 repealed 6 October 2009 section 22(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 51: Property transfers between associated persons
Section CD 51 repealed 6 October 2009 section 22(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 52: Unrepatriated income balance
Section CD 52 repealed 6 October 2009 section 22(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Prevention of double taxation
CD 53: Prevention of double taxation of share cancellation dividends
When this section applies
1: This section applies when—
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 (the other rules
i: section CB 1
ii: section CB 3
iii: section CB 4
iv: section CB 5
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 Non-taxable dividends
3: Subsection (2) does not apply to the extent to which the dividend is exempt income of the person under sections CW 9 and CW 10 Subsection (3)(b): formula
4: Definition of items in formula
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 22 to CD 27 Relationship with section FA 3
7: This section is overridden by section FA 3 amount cancellation company dividend exempt income imputation credit income income tax share tax year 2004 No 35 s CD 42 Section CD 53(2) amended 1 April 2017 section 24 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 53(3) heading substituted 6 October 2009 section 23(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 53(3) substituted 6 October 2009 section 23(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 53(3) amended 7 May 2012 section 6(1) Taxation (International Investment and Remedial Matters) Act 2012 Section CD 53(4) heading repealed 6 October 2009 section 23(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 53(4) repealed 6 October 2009 section 23(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 53(5) heading repealed 6 October 2009 section 23(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 53(5) repealed 6 October 2009 section 23(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 53(5)(b) amended 1 April 2008 section 562 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CD 53(5)(b) amended 1 April 2008 section 318 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CD 53 list of defined terms FDP repealed 6 October 2009 section 23(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 53 list of defined terms FDP credit repealed 6 October 2009 section 23(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Returning share transfers
CD 54: 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 2004 No 35 s CD 43
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:
(bb): the value of accommodation referred to in sections CE 1B to CE 1E
c:
d: a benefit received under an employee share scheme
e: directors’ fees:
f: compensation for loss of employment or service:
g: any other benefit in money. Benefit of accommodation
1B: Unrepaid overpayments
1C: A person who receives an amount that is an unrepaid PAYE income overpayment is treated as deriving the amount in connection with their employment or service—
a: for the income year in which they receive the amount, if paragraph (b) does not apply; or
b: on the payday for which the employment income information of the employer who paid the amount to the person includes an upwards adjustment for the amount under regulations made under section 23N Repaid overpayments
1D: An amount received by a person that is a PAYE-related overpayment is not income of the person to the extent to which—
a: the amount has been repaid to the employer who paid the amount to the person:
b: the amount is repayable to that employer by the person under an agreement between them and none of the following apply:
i: the person breaches the agreement and does not remedy the breach within 2 months:
ii: that employer considers that the person will not comply with the agreement in the future:
c: the amount is recoverable under section 248 Meaning of accommodation
2: For the purposes of this section, and sections CE 1B to CE 1E CW 16B to CW 16F CW 17CB CW 19B CZ 23 CZ 23B CZ 29 to CZ 30 FP 22 accommodation
a: includes—
i: board or lodging:
ii: the use of a house or living premises, or the use of part of a house or living premises, whether permanent or temporary:
b: does not include—
i: a berth, room, or other lodging provided on a mobile workplace, for example, a ship, a truck, an oil rig, or other similar workplace:
ii: a station in Antarctica:
iii: a room or lodging that is provided for a shift worker who is required in the performance of their employment duties periodically to sleep at their workplace when the accommodation is provided only for the duration of the performance of those duties, for example, fire-fighters, ambulance staff, care-givers, and other similar employees:
iv: the use of a room or other dwelling provided at a remote location outside New Zealand when a person's employment duties require them to work at the location for a period and also require them to be absent from the location for a period, for example, miners in Australia who regularly fly to and from a mining camp and other similar employees. Meaning of employer
3: Employer
a: in this section, in sections CE 1B CW 16B to CW 16F CZ 23B CZ 29 to CZ 30 FP 22 employee
i: provides accommodation for the employee at a distant workplace; or
ii: pays an amount for the employee's accommodation at a distant workplace:
b: in sections CW 16B to CW 16F CZ 23B CZ 29 to CZ 30 FP 22 Persons on shadow payrolls
3B: For the treatment of PAYE income payments made to a cross-border employee who undertakes employment services in New Zealand, see section CE 1F Amendment of exclusions by Order in Council
4: For the purposes of subsection (2), the Governor-General may by Order in Council make regulations to add to the types of accommodation that are excluded by paragraph (b) of the definition of accommodation Application of Order in Council
5: An Order in Council under subsection (4) may—
a: come into force on a date that is not earlier than 1 April 2015:
b: apply for income years that do not precede the 2015–16 income year. Secondary legislation
6: An Order in Council under subsection (4)—
a: is secondary legislation ( see Part 3
b: commences in accordance with subsection (5), even if it is not yet published. accommodation amount cross-border employee employee share scheme employer employment income information expenditure on account of an employee extra pay income income year New Zealand non-resident payday PAYE income payment PAYE-related overpayment salary or wages unrepaid PAYE income overpayment 2004 No 35 s CE 1 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section CE 1(1) heading inserted 6 October 2009 section 24(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CE 1(1)(bb) inserted 1 April 2015 section 14(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1(1)(c) repealed 21 December 2010 section 30(1) Taxation (GST and Remedial Matters) Act 2010 Section CE 1(1)(d) amended 29 September 2018 section 17(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 1(1B) heading repealed 1 April 2015 section 14(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1(1B) repealed 1 April 2015 section 14(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1(1C) heading inserted 1 April 2019 section 132(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CE 1(1C) inserted 1 April 2019 section 132(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CE 1(1D) heading inserted 1 April 2019 section 132(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CE 1(1D) inserted 1 April 2019 section 132(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CE 1(2) heading added 6 October 2009 section 24(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CE 1(2) replaced 1 April 2015 section 14(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1(2) amended 1 April 2025 section 13(1)(a) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CE 1(2) amended 1 April 2025 section 13(1)(b) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CE 1(2) amended 28 March 2024 section 16(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CE 1(3) heading inserted 1 April 2015 section 14(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1(3) inserted 1 April 2015 section 14(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1(3)(a) amended 1 April 2025 section 13(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CE 1(3)(a) amended 28 March 2024 section 16(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CE 1(3)(b) amended 1 April 2025 section 13(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CE 1(3)(b) amended 28 March 2024 section 16(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CE 1(3B) heading inserted 1 April 2019 section 17(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 1(3B) replaced 1 April 2023 section 16(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1(4) heading inserted 1 April 2015 section 14(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1(4) inserted 1 April 2015 section 14(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1(5) heading inserted 1 April 2015 section 14(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1(5) inserted 1 April 2015 section 14(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1(6) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section CE 1(6) inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section CE 1 list of defined terms accommodation inserted 6 October 2009 section 24(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CE 1 list of defined terms cross-border employee inserted 1 April 2023 section 16(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1 list of defined terms employee share scheme inserted 29 September 2018 section 17(3)(a) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 1 list of defined terms employer inserted 1 April 2019 section 17(3)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 1 list of defined terms employment income information inserted 1 April 2019 section 17(3)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 1 list of defined terms income year inserted 1 April 2019 section 132(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CE 1 list of defined terms New Zealand inserted 1 April 2019 section 17(3)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 1 list of defined terms non-resident inserted 1 April 2019 section 17(3)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 1 list of defined terms payday inserted 1 April 2019 section 132(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CE 1 list of defined terms PAYE income payment inserted 1 April 2019 section 17(3)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 1 list of defined terms PAYE-related overpayment inserted 1 April 2019 section 132(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CE 1 list of defined terms share purchase agreement repealed 29 September 2018 section 17(3)(c) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 1 list of defined terms unrepaid PAYE income overpayment inserted 1 April 2019 section 132(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
CE 1B: General rule: accommodation provided by employers
Value of accommodation
1: The value of accommodation provided to a person is income of the person when it is provided in relation to their employment or service. The value is an amount equal to the market rental value of the accommodation. Value of accommodation allowances
2: The value of an accommodation allowance provided to a person is income of the person when it is provided in relation to their employment or service. The value is equal to the amount of the allowance paid to the person. Payments and reimbursements
3: An amount paid for or towards the provision of accommodation for a person, whether as expenditure on account of an employee or as a reimbursement, is income of the person when it is paid in relation to their employment or service. Adjustments to values
4: The value under subsection (1) may be adjusted as follows:
a: when more than 1 person referred to in that subsection shares in the accommodation provided, the amount may be—
i: apportioned equally among the number of persons referred to in that subsection who are sharing in the accommodation; or
ii: if the persons referred to in that subsection who are sharing in the accommodation agree with the person providing the accommodation, apportioned on another reasonable basis:
b: when the person to whom the accommodation is provided contributes towards their occupation of the accommodation, the amount may be reduced by the amount contributed:
c: when the person to whom the accommodation is provided uses part of the accommodation wholly or mainly for work purposes related to their employment or service, the amount may be apportioned between business use and private use. Adjustments: allowances and amounts paid
5: Subsection (4)(b) and (c) may apply to adjust the value of an accommodation allowance or an amount paid for or towards the provision of accommodation under subsections (2) and (3). Exceptions
6: Sections CE 1C CE 1E accommodation amount business employer employment expenditure on account of an employee income pay Section CE 1B inserted 1 April 2015 section 15 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CE 1C: Exception: overseas accommodation
Relevant local rental
1: Despite section CE 1B
a: the location where the person would be likely to work for their employer in New Zealand; and
b: the equivalent accommodation in New Zealand that the person would be likely to occupy; and
c: the average or median market rental value in the vicinity of the location referred to in paragraph (a). Inclusion of allowances or payments
1B: For the purposes of subsection (1), the provision of accommodation at or near an overseas work location includes an accommodation allowance or an amount paid for or towards the provision of the accommodation when the amount of the allowance or payment is—
a: the actual cost to the employee for the accommodation; or
b: a reasonable estimate of the expenditure that is likely to be incurred by the employee, or group of employees, for whom the amount is payable. When overseas rental is less than New Zealand equivalent
2: For the purposes of subsection (1), if the value of the accommodation in the overseas location is less than the New Zealand equivalent market rental value, the value that must be used is the value in the overseas location. When location in New Zealand is uncertain
3: For the purposes of subsection (1)(a), if the location where the person would be likely to work for their employer in New Zealand is uncertain, the relevant market rental value is taken as either the average market rental value or the median market rental value, as applicable, for the whole of New Zealand. accommodation amount New Zealand Section CE 1C inserted 1 April 2015 section 15 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1C(1) amended 24 February 2016 section 76(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CE 1C(1B) heading inserted 24 February 2016 section 76(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CE 1C(1B) inserted 24 February 2016 section 76(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CE 1D: Exception: accommodation provided by Defence Force
When this section applies
1: This section applies for the purposes of section CE 1B(1) Defence Act 1990 Market rental value
2: The market rental value of the accommodation is an amount equal to the lesser of—
a: the market rental value for the accommodation; and
b: the market rent payable for the national New Zealand Defence Force benchmark property for the type of accommodation provided to the person, less the discount applying to the type of accommodation. National benchmark properties and discounts
3: For the purposes of this section, the Commissioner and the Chief of the Defence Force, in consultation with a registered valuer, must determine—
a: the number and location of national benchmark properties:
b: the types of accommodation represented by the benchmark properties:
c: a market rental value for each type of accommodation in the benchmark properties:
d: a discount applying to each type of accommodation in the benchmark properties. Three-yearly review
4: A determination under subsection (3)(c) and (d) must be reviewed every 3 years. Either the Commissioner or the Chief of the Defence Force may instigate the review. accommodation amount Commissioner pay Section CE 1D inserted 1 April 2015 section 15 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CE 1E: Exception: accommodation provided to ministers of religion
Income
1: Despite section CE 1B(1) Limited amount
2: The amount of income for an income year is calculated using the formula— remuneration × (1 − adjustment) + excess rental. Definition of items in formula
3: In the formula,—
a: remuneration
b: adjustment
c: excess rental
i: the market rental value for the income year of the accommodation provided; and
ii: the market rental value for the income year of accommodation that is reasonably commensurate with the duties of the person as a minister and for the location in which they perform their duties. Calculation of remuneration for purposes of section
3B: For the purposes of subsection (3)(a), the calculation of the amount of the item remuneration Adjustments
4: An adjustment referred to in subsection (3)(b) is as follows:
a: if the person to whom the accommodation is provided uses part of the accommodation wholly or mainly for work purposes related to their duties as a minister, the amount is apportioned between that business use and private use:
b: if more than 1 person referred to in subsection (1) shares in the accommodation provided, the amount is apportioned equally between them. Part-year
5: For the purposes of this section, if accommodation is provided for part of an income year, the reference to income year is read as a reference to the relevant part of the income year. Meaning of minister of religion
6: For the purposes of this section, minister of religion
a: means a person—
i: who is ordained, commissioned, appointed, or otherwise holds an office or position, regardless of their title or designation, as a minister of a religious denomination or community that meets the charitable purpose of the advancement of religion; and
ii: whose duties are related mainly to the practice, study, teaching, or advancement of religious beliefs; and
iii: whose accommodation is used as an integral part of performing their duties:
b: does not include a member of a religious society or order referred to in section CW 25 accommodation amount business income year minister of religion Section CE 1E inserted 1 April 2015 section 15 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 1E(3B) heading inserted 24 February 2016 section 77 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CE 1E(3B) inserted 24 February 2016 section 77 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CE 1F: Treatment of amounts derived by cross-border employees
When this section applies
1: This section applies in certain circumstances when an employer pays a PAYE income payment to a cross-border employee who provides services in New Zealand. For this purpose, the payment may include an amount paid to the person after they have left New Zealand that is a payment for services provided by the person while they were in New Zealand. Amounts treated as derived 20 days after payment
2: When the employee remains on the employer’s payroll system in a country or territory outside New Zealand, the PAYE income payment is treated as derived by them on the 20th day after payment when the employer chooses to deliver their employment income information under section 23J(3) Employees undertaking tax obligations
3: When an amount of tax is not withheld or when payment is insufficient as described in section RD 21 RD 62B RD 71B Meeting or correcting employment-related tax obligations
3B: Subsection (3C) applies when the employer or other person that the PAYE rules apply to under section RD 2(2)
a: the employee is a New Zealand resident working outside New Zealand for a period, and during that period the employee receives an unexpected PAYE income payment:
b: the employee is present in New Zealand for a period during which they—
i: have breached a threshold under section CW 19
ii: have breached a threshold set out in a double tax agreement:
iii: have received an unexpected PAYE income payment in the period. Grace period
3C: The employer or other person that the PAYE rules apply to has a 60-day period within which they must make a reasonable effort to meet or correct their tax obligations relating to the PAYE income payments, employer superannuation cash contributions, or fringe benefits made or provided to the employee for the time the employee was in New Zealand. Timing
3D: The 60-day period referred to in subsection (3C) starts to run from the earlier of—
a: the date of the breach or the payment, as applicable:
b: the date on which the employer could reasonably foresee that a breach or a payment, as applicable, will occur. Grace period when employee has undertaken obligations
3E: When the employee has undertaken to meet their employment-related tax obligations under subsection (3) for the period during which they are in New Zealand, the employee may be treated as the employer for the purposes of subsection (3C), making the grace period available to the employee. Meaning of cross-border employee
4: For the purposes of this section and sections CE 1(3B) RA 15(4B) RD 62B RD 65 RD 71B sections 23IB 120B 141ED cross-border employee
a: means—
i: for a person providing a service in New Zealand, an employee of a non-resident employer:
ii: for a person providing a service outside New Zealand, a resident employee; and
b: includes a secondee or a person who provides a service for or on behalf of a person who is not resident in New Zealand. amount of tax cross-border employee double tax agreement employee employer employment income information fringe benefit New Zealand non-resident pay PAYE income payment Section CE 1F inserted 1 April 2023 section 17 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1F(3B) heading inserted 1 April 2024 section 18(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1F(3B) inserted 1 April 2024 section 18(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1F(3C) heading inserted 1 April 2024 section 18(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1F(3C) inserted 1 April 2024 section 18(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1F(3D) heading inserted 1 April 2024 section 18(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1F(3D) inserted 1 April 2024 section 18(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1F(3E) heading inserted 1 April 2024 section 18(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1F(3E) inserted 1 April 2024 section 18(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CE 1F list of defined terms double tax agreement inserted 1 April 2024 section 18(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CE 2: Benefits under employee share schemes
Benefit
1: A person who is an employee share scheme beneficiary described in section CE 7(a)(i) or (ii) section CE 1(1)(d) share value − consideration paid + consideration received − previous income. Definition of items in formula
2: In the formula in subsection (1),—
a: share value
b: consideration paid
c: consideration received
d: previous income section CE 1(1)(d) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Negative amount: deduction
3: A negative amount calculated using the formula in subsection (1) is a deduction of the person. Positive and negative amount: cost of revenue account property
4: A positive or negative amount calculated using the formula in subsection (1) is added to the consideration paid by the person for acquiring the shares, for the purposes of section DB 23 Apportionment
5: For the person’s benefit under subsection (1), the portion of that benefit calculated using the formula is treated as non-residents’ foreign-sourced income— benefit before reduction × offshore period ÷ earning period. Definition of items in formula
6: In the formula in subsection (5),—
a: benefit before reduction
b: offshore period earning period
i: the person is not resident in New Zealand; and
ii: any services the person performs for the relevant employer give rise to an amount of income that is a foreign-sourced amount:
c: earning period
i: the first date used to measure the person’s right in relation to the vesting of shares or relevant rights:
ii: the first date that the person has a right in relation to the vesting of shares or relevant rights. When subsection (8) applies
7: Subsection (8) applies when an employer is required to provide employment income information under sections RD 22(3) 23E to 23H section 23K Deferral of income recognition
8: Despite section CE 1(1)(d) on the ESS deferral date Meaning of ESS deferral date
9: For the purposes of this section and sections RD 6 RD 7B ESS deferral date amount amount of tax consideration deduction employee employee share scheme employee share scheme beneficiary employer employment income employment income information ESS deferral date foreign-sourced amount income market value non-residents’ foreign-sourced income pay replacement employee share scheme resident in New Zealand share share scheme taxing date Section CE 2 replaced 29 September 2018 section 19 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 2(7) replaced 1 April 2019 section 20(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 2(8) amended 1 April 2019 section 20(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 2(9) heading inserted 1 April 2019 section 20(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 2(9) inserted 1 April 2019 section 20(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 2 list of defined terms employer monthly schedule repealed 1 April 2019 section 20(4)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 2 list of defined terms employment income information inserted 1 April 2019 section 20(4)(a) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 2 list of defined terms ESS deferral date inserted 1 April 2019 section 20(4)(a) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 2 list of defined terms PAYE income payment form period repealed 1 April 2019 section 20(4)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CE 3: Restrictions on disposal of shares under share purchase agreements
Section CE 3 repealed 29 September 2018 section 19 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CE 4: Adjustments to value of benefits under share purchase agreements
Section CE 4 repealed 29 September 2018 section 19 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Definitions
CE 5: Meaning of expenditure on account of an employee
Meaning
1: Expenditure on account of an employee Inclusion
2: 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 17
b: an amount paid under—
i: sections CW 16B to CW 16F
ii: section CW 17B
iii: section CW 17C
iv: section CW 17CB
v: section CW 17CC
vb: section CW 17D
vi: section CW 18
bb:
c: expenditure, other than an amount to which paragraph (a) applies, that an employee pays in connection with their employment or service to the extent to which—
i: the amount of the expenditure is incurred by or on behalf of their employer; and
ii: the employee pays the amount on their employer's behalf:
d: expenditure on an employment-related loan to which the fringe benefit tax (FBT) rules apply:
e: an employer’s superannuation contribution:
f:
g:
h:
i:
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 amount contribution employee employer employer’s superannuation contribution employment employment-related loan expenditure on account of an employee FBT rules pay premium 2004 No 35 s CE 5 Section CE 5(1) replaced 2 November 2012 section 11(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CE 5(2) heading repealed 30 March 2017 section 25(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CE 5(2) repealed 30 March 2017 section 25(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CE 5(3)(b) replaced 1 April 2015 section 16(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 5(3)(b)(vb) inserted 1 April 2025 section 14 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CE 5(3)(bb) repealed 1 April 2015 section 16(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 5(3)(c) replaced 1 April 2015 section 16(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 5(3)(f) repealed 30 March 2017 section 25(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CE 5(3)(g) repealed 30 March 2017 section 25(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CE 5(3)(h) repealed 30 March 2017 section 25(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CE 5(3)(i) repealed 30 March 2017 section 25(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CE 5 list of defined terms amount inserted 1 April 2015 section 16(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 5 list of defined terms associated person repealed 29 March 2018 section 21 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 5 list of defined terms close company repealed 29 March 2018 section 21 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 5 list of defined terms dividend repealed 29 March 2018 section 21 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 5 list of defined terms employment inserted 1 April 2015 section 16(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CE 5 list of defined terms life insurance policy repealed 29 March 2018 section 21 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 5 list of defined terms superannuation category 1 scheme repealed 29 March 2018 section 21 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 5 list of defined terms superannuation category 2 scheme repealed 29 March 2018 section 21 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 5 list of defined terms superannuation category 3 scheme repealed 29 March 2018 section 21 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 5 list of defined terms trustee repealed 29 March 2018 section 21 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CE 6: Trusts are nominees
A trustee is treated as the nominee of a company ( company A employee share scheme or an exempt ESS
a: shares or related rights in company A are issued or transferred under the scheme:
b: shares or related rights are issued or transferred to company A’s employees, shareholder-employees, or associates of them, under the scheme. associated person company employee employee share scheme exempt ESS share shareholder-employee trustee Section CE 6 replaced 29 September 2018 section 22 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CE 6 amended 30 March 2021 section 17(1) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CE 6 list of defined terms exempt ESS inserted 30 March 2021 section 17(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
CE 7: Meaning of employee share scheme
Employee share scheme
a: an arrangement with a purpose or effect of issuing or transferring shares in a company ( company A
i: who will be, is, or has been an employee of company A or of another company that is a member of the same group of companies as company A, if the arrangement is connected to the person’s employment or service:
ii: who will be, is, or has been a shareholder-employee in relation to company A or in relation to another company that is a member of the same group of companies as company A, if the arrangement is connected to the person’s employment or service:
iii: who is an associate of a person described in subparagraph (i) or (ii) ( person A
b: does not include an arrangement that—
i: is an exempt ESS:
ii: requires market value consideration to be paid by a person described in paragraph (a) for the transfer of shares in the company on the share scheme taxing date:
iii: requires a person described in paragraph (a) to put shares, acquired by them for market value consideration, at risk, if the arrangement provides no protection against a fall in the value of the shares and none of the consideration for acquiring the shares is provided to the person under an agreement that it is used for acquiring the shares. arrangement associated person company consideration employee employment exempt ESS group of companies market value share share scheme taxing date shareholder-employee Section CE 7 replaced 29 September 2018 section 22 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CE 7B: Meaning of share scheme taxing date
Meaning
1: Share scheme taxing date
a: the first date when the shares are held by or for the benefit of an employee share scheme beneficiary ( beneficial ownership
i: there is no material risk that beneficial ownership may change or that a right or requirement in relation to the transfer or cancellation of the shares may operate; and
ii: there is no benefit accruing to the employee share scheme beneficiary in relation to a fall in value of the shares; and
iii: there is no material risk that there will be a change in the terms of the shares affecting the value of the shares:
b: the date when the shares or related rights of an employee share scheme beneficiary are cancelled or are transferred to a person who is not associated with a beneficiary described in section CE 7(a)(i) or (ii) Exclusions
2: For the purposes of applying subsection (1), the following requirements and rights are ignored:
a: a right or requirement in relation to transfer by the employee share scheme beneficiary for market value consideration at the time of the transfer:
b: a right or requirement that is not contemplated by the employee share scheme’s provisions:
c: a right or requirement that, at the time it came into existence, had no material risk of operating or no material commercial significance:
d: a right or requirement in relation to the transfer of shares, if the right or requirement is 1 that also applies to shares not under the employee share scheme. Example 1 – Simple vesting period
Acme Limited transfers shares worth $10,000 to a trustee on trust for an employee, Alice, of Acme Limited. Under the terms of the trust, Alice forfeits, for no consideration, any contingent interest or beneficial ownership in the shares if she leaves the employ of Acme Limited within 3 years of the transfer of the shares to the trustee. Alice stays for 3 years, and, under the terms of the trust, the shares are transferred absolutely to her on her 3rd anniversary of employment. It is a material risk, for the 3 years after the transfer to the trustee, that the terms of the trust will operate to forfeit any contingent interest or beneficial ownership in the shares. Consequently, the share scheme taxing date for Alice’s shares is her 3rd anniversary of employment. Example 2 – Vesting subject to misconduct
Acme Limited transfers shares worth $10,000 to a trustee on trust for an employee, Bob, of Acme Limited. Under the terms of the trust, Bob forfeits, for no consideration, any contingent interest or beneficial ownership in the shares if he leaves the employ of Acme Limited because he is dismissed for serious misconduct within 3 years of the transfer of the shares to the trustee. It is not a material risk that the terms of the trust will operate to forfeit any contingent interest or beneficial ownership in the shares. The risk that Bob will be dismissed for serious misconduct within 3 years is not material. Consequently, the share scheme taxing date for Bob’s shares is the date when the shares are transferred to the trustee. associated person consideration employee share scheme employee share scheme beneficiary market value share Section CE 7B inserted 29 September 2018 section 22 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CE 7C: Meaning of employee share scheme beneficiary
Employee share scheme beneficiary
a: a person ( person A section CE 7(a)
b: a person who is an associate of person A. associated person employee share scheme Section CE 7C inserted 29 September 2018 section 22 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CE 7CB: Meaning of market value
Market value
a: has the same meaning as in section YA 1 market value
b: includes, for a share or option quoted on the official list of a recognised exchange, at the time, an amount equal to the 5-day volume weighted average price or any other method that is accepted by the Commissioner or is comparable to the 5-day volume weighted average price, for such shares or options. Section CE 7CB inserted 23 March 2020 section 94 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CE 7D: Meaning of replacement employee share scheme
Replacement employee share scheme old scheme employee share scheme Section CE 7D inserted 29 September 2018 section 22 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Attributed income
CE 8: Attributed income from personal services
When this section applies
1: This section applies when, under sections GB 27 to GB 29 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 2004 No 35 s CE 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 held by person A or an associated person
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. Avoidance arrangements
6: Section GB 30 amount arrangement associated person business company employee income share 2004 No 35 s CE 9 Section CE 9(4)(a) amended 30 March 2025 section 15(1) section 15(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
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 2004 No 35 s CE 10 Income protection insurance
CE 11: Proceeds from claims under policies of income protection insurance
When this section applies
1: This section applies when 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 2004 No 35 s CE 11 Tax credits
CE 12: Tax credits for personal service rehabilitation payments
When this section applies
1: This section applies when a person has a tax credit in a tax year under section LB 7 Income
2: An amount equal to the credit is income of the person in the corresponding income year. amount corresponding income year income income year personal service rehabilitation payment tax credit tax year 2004 No 35 s CE 12 Section CE 12 substituted 1 July 2008 section 319 Taxation (Business Taxation and Remedial Matters) Act 2007
CF: Income from living allowances,
foreign superannuation, Subpart CF heading amended 1 April 2014 section 7 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 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: a payment of a main benefit:
d:
e: a New Zealand superannuation payment:
f: a parental leave payment or preterm baby payment Part 7A Parental Leave and Employment Protection Act 1987
fb: a payment of earnings compensation under the Compensation for Live Organ Donors Act 2016
g: a pension:
h: a veteran’s pension:
i: a retirement lump sum paid under Part 5, subpart 7
j: weekly income compensation paid under Part 3, subpart 4
k: weekly compensation paid under Part 4, subpart 5
l: weekly compensation or aggregated payments, as applicable, paid under schedule 2, part 4, clause 54 55 58 59 Some definitions
2: In this section,— accident compensation payment
a: a payment under the Accident Compensation Act 1982 or refunded to,
b: a payment under section 80(4) of the Accident Compensation Act 1982 that is not recovered or recoverable by, or refunded to,
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; or
ii: compensation for loss of earnings under any of sections 38, 39, and 43; or
iii: compensation for loss of potential earning capacity under section 45 or 46; or
iv: weekly compensation under any of sections 58, 59, and 60; or
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, as it was immediately before its repeal by section 7 of the Accident Insurance Amendment Act 2000, of compensation for loss of earnings or loss of potential earning capacity as it relates to work-related personal injury:
f: a payment under the Accident Compensation Act 2001 section 248
g: a payment under section 81(1)(b) Accident Compensation Act 2001 clause 12
h: a personal service rehabilitation payment for a person under the Accident Compensation Act 2001
i: education grant section 645 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, former spouse, civil union partner or de facto partner, or dependant, provided to the payer when the payment would not have been made if the services had not been provided; and
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, former spouse, civil union partner or de facto partner, or dependant. accident compensation payment amount chief executive of the administering department education grant income main benefit New Zealand superannuation pay pension personal service rehabilitation payment veteran’s pension year 2004 No 35 s CF 1 Section CF 1(1)(c) replaced 30 March 2021 section 141 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CF 1(1)(d) repealed 2 September 2013 section 16(1) Social Assistance (Living Alone Payments) Amendment Act 2013 Section CF 1(1)(f) amended 1 April 2016 section 83 Parental Leave and Employment Protection Amendment Act 2016 Section CF 1(1)(fb) inserted 5 December 2017 section 30 Compensation for Live Organ Donors Act 2016 Section CF 1(1)(h) replaced 31 March 2015 section 11(1) Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 Section CF 1(1)(i) replaced 31 March 2015 section 11(2) Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 Section CF 1(1)(j) inserted 31 March 2015 section 11(2) Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 Section CF 1(1)(k) inserted 31 March 2015 section 11(2) Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 Section CF 1(1)(l) inserted 31 March 2015 section 11(2) Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 Section CF 1(2) accident compensation payment amended 7 December 2009 section 7 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section CF 1(2) accident compensation payment amended 7 December 2009 section 7 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section CF 1(2) accident compensation payment substituted 6 October 2009 section 26 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CF 1(2) accident compensation payment amended 21 December 2010 section 189 Taxation (GST and Remedial Matters) Act 2010 Section CF 1(2) accident compensation payment substituted 6 October 2009 section 26 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CF 1(2) accident compensation payment amended 21 December 2010 section 189 Taxation (GST and Remedial Matters) Act 2010 Section CF 1(2) accident compensation payment added 6 October 2009 section 26 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CF 1(2) accident compensation payment amended 21 December 2010 section 189 Taxation (GST and Remedial Matters) Act 2010 Section CF 1(2) accident compensation payment repealed 31 March 2015 section 11(3) Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 Section CF 1(2) education grant amended 1 August 2020 section 668 Education and Training Act 2020 Section CF 1 list of defined terms income-tested benefit repealed 30 March 2021 section 141 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CF 1 list of defined terms living alone payment repealed 2 September 2013 section 16(1) Social Assistance (Living Alone Payments) Amendment Act 2013 Section CF 1 list of defined terms main benefit inserted 30 March 2021 section 141 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CF 1 list of defined terms personal service rehabilitation payment inserted 1 July 2008 section 320(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 an earlier income year that is 1 of the 3 income years. Business ceasing
4: If the person stops carrying 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 stops carrying on the business. amount business income income year public authority 2004 No 35 s CF 2
CF 3: Withdrawals from foreign superannuation scheme
When this section applies
1: This section applies when a New Zealand resident derives a benefit (a foreign superannuation withdrawal scheme
a: is not a FIF superannuation interest and is acquired—
i: when the person is a non-resident or is treated under a double tax agreement as being resident in a foreign country or territory:
ii: in a transaction referred to in subsection (21)(b) or (d) from a person who acquired the interest in the scheme when being a non-resident or when treated under a double tax agreement as being resident in a foreign country or territory:
b: is a FIF superannuation interest (a low-value FIF superannuation interest sections CQ 5(1)(d) DN 6(1)(d) Income
2: The foreign superannuation withdrawal is income of the person if the benefit is in the form of—
a: an amount derived by the person as a member or beneficiary of the scheme:
b: an interest of the person in the scheme, withdrawn for reinvestment as an interest of the person in a superannuation scheme in New Zealand:
c: an interest of the person in the scheme, outside Australia, withdrawn for reinvestment as an interest of the person in a superannuation scheme in Australia:
d: an interest of the person in the scheme withdrawn for reinvestment as an interest of another person in a superannuation scheme. Exception
3: A foreign superannuation withdrawal is not income of the person under subsection (2)(d) if—
a: the benefit is an interest of the person in the scheme that is withdrawn on the death of the person or under a relationship agreement arising from an event (the relationship cessation
i: for a marriage or civil union of the person, the marriage or civil union is dissolved or the person and the person’s spouse or civil union partner separate or begin to live apart (whether or not they continue to live in the same residence):
ii: for a de facto relationship of the person, the de facto relationship ends; and
b: immediately before the death or the relationship cessation, the person is a New Zealand resident who is treated under no double tax agreement as being resident in a foreign country or territory; and
c: the interest withdrawn is immediately reinvested as an interest, in a foreign superannuation scheme outside Australia, of another person who is—
i: a spouse, civil union partner, or de facto partner of the person immediately before the death or the relationship cessation; and
ii: a New Zealand resident who is treated under no double tax agreement as being resident in a foreign country or territory. Amounts within other provisions
4: A foreign superannuation withdrawal derived by a resident is subject to—
a: section CW 28B
i: is a resident under section YD 1
ii: derives the foreign superannuation withdrawal in the exemption period referred to in subsection (6):
b: section CW 28C
i: the amount referred to in subsection (10) as the assessable withdrawal amount, if the person uses the schedule method; or
ii: the amount referred to in subsection (16) as the assessable withdrawal amount, if the person uses the formula method. Eligibility for exemption period
5: A person has an exemption period referred to in subsection (6) for an interest in the scheme, other than a low-value FIF superannuation interest,
a: does not have, before acquiring the interest, an exemption period for an interest in a foreign superannuation scheme; and
b: acquires the interest as a non-resident; and
c: owns the interest as a non-resident until a date (the exemption commencement Exemption period
6: The period (the exemption period section CW 28B
a: the end of the period of 48 months beginning after the month in which the person meets the requirements of section YD 1(2) or (3)
b: the date on which the person becomes a non-resident again. Assessable withdrawal amount
7: The part (the assessable withdrawal amount assessable period Assessable period
8: The assessable period for the person and a foreign superannuation withdrawal arising from an interest in the foreign superannuation scheme—
a: if the person is a non-resident when they acquire the interest, begins
i: the date when the person becomes, for the first time after acquiring the interest in the scheme, a New Zealand resident who owns the interest in the scheme:
ii: the end of the person's exemption period:
ab: if the person is a resident who is treated under a double tax agreement as being resident in a foreign country or territory when they acquire the interest in the scheme, begins on the date when the person becomes, for the first time after acquiring the interest, a New Zealand resident who is treated under no double tax agreement as being resident in a foreign country or territory and who owns the interest in the scheme:
ac: if the person is a resident when they acquire the interest and paragraph (ab) does not apply, begins when they acquire the interest:
b: ends on the date when the person derives the foreign superannuation withdrawal (the distribution time
c: does not include a period in which the person is a non-resident. Methods for determining assessable withdrawal amount
9: The assessable withdrawal amount for a foreign superannuation withdrawal derived by the person is calculated for—
a: the schedule method under subsection (10), if paragraph (b) does not apply; or
b: the formula method under subsection (16), if—
i: the scheme is a foreign defined contribution scheme; and
ib: the interest is not a low-value FIF superannuation interest; and
ii: the person has the information required for the application of the formula method; and
iii: the person derives no withdrawal, other than a pension or annuity, from the scheme before 1 April 2014; and
iv: the person has not used the schedule method for the interest in the scheme; and
v: for a person who acquires the interest in the scheme of a spouse, civil union partner, or de facto partner by a transfer referred to in subsection (21)(d), the other person did not use the schedule method for the interest in the scheme; and
vi: the person chooses to use the formula method for the interest in the scheme. Schedule method: assessable withdrawal amount
10: The assessable withdrawal amount under the schedule method is calculated using the formula— (super withdrawal − contributions left) × schedule year fraction. Definition of items in formula in subsection (10)
11: In the formula in subsection (10),—
a: super withdrawal
b: contributions left earlier withdrawal
i: the amount of the earlier withdrawal:
ii: the value of the item contributions left, immediately before the time of the earlier withdrawal:
c: schedule year fraction schedule 33
i: in the assessable period under subsection (8); and
ii: before the distribution time. Formula method: distributed gain
12: Under the formula method, the part (the distributed gain (super withdrawal × calculated gains fraction) − other gains. Definition of items in formula in subsection (12)
13: In the formula in subsection (12),—
a: super withdrawal
b: other gains Formula method: calculated gains fraction
14: In the formula in subsection (12), calculated gains fraction (predistribution + withdrawals − value − contributions) ÷ predistribution. Definition of items in formula in subsection (14)
15: In the formula in subsection (14),—
a: predistribution
b: withdrawals
c: value
d: contributions Formula method: assessable withdrawal amount
16: The assessable withdrawal amount under the formula method is the amount calculated using the formula— gain × (grow rate − 1) × tax rate × (assessable years − 1) + gain. Formula method: grow rate
17: In the formula in subsection (16), grow rate (accrued total ÷ value) (1 ÷ assessable years) Definition of other items in formulas in subsections (16) and (17)
18: In the formulas in subsections (16) and (17),—
a: gain
b: tax rate schedule 6
c: assessable years
d: accrued total
e: value Recognised contributions
19: The value of a payment to the scheme is taken into account in the formulas in subsections (10), (14), and (17) as a contribution (a recognised contribution
a: is made when the person is a New Zealand resident who is treated as a New Zealand resident under all applicable double tax agreements; and
b: is made by the person, by the person's employer, or for the benefit of the person; and
c: is required by the rules of the scheme; and
d: is subject to employer superannuation contribution tax or fringe benefit tax if made by the person's employer. Interests in superannuation scheme
20: For the purposes of this section, if a person acquires, under an arrangement with a foreign superannuation scheme that provides for contributions to the superannuation scheme by or for the person, rights ( benefit rights When person acquires rights
21: In determining when a person who acquires rights in a foreign superannuation scheme acquires an interest in the foreign superannuation scheme,—
a: if none of paragraphs (b) to (d) apply, the person is treated as acquiring the rights
b: if the person is converting existing rights of the person in another foreign superannuation scheme (the former scheme the corresponding rights
c: if the person is acquiring existing rights in the superannuation scheme from another person, other than by a transaction to which paragraph (d) applies, the person is treated as acquiring the existing rights
d: if the person is acquiring existing rights in the superannuation scheme of a New Zealand resident (the former owner
i: having owned the existing rights from the time the former owner acquired the existing rights; and
ii: having made all payments to the scheme that were made by or for the former owner; and
iii: having derived all distributions from the scheme that the former owner derived; and
iv: having been a New Zealand resident who is treated under no double tax agreement as being resident in a foreign country or territory and as having owned the existing rights during the assessable period of the former owner, at the time of the transfer, for the interest consisting of the rights; and
v: continuing to own the existing rights Relationship with rest of Act
22: If the assessable period for a person and an interest begins before 1 April 2014, this section overrides any provision of this Act that would otherwise quantify and allocate income of the person, from the part of the interest unaffected by withdrawals derived before 1 April 2014,—
a: for the period of ownership before 1 April 2014; and
b: not assessed for tax before 1 April 2014. amount de facto partner double tax agreement FIF superannuation interest foreign defined contribution scheme foreign superannuation scheme foreign superannuation withdrawal income income year New Zealand resident non-resident relationship agreement superannuation scheme transitional resident Section CF 3 inserted 1 April 2014 section 8 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CF 3(1) replaced 24 February 2016 section 78(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(1) replaced 24 February 2016 section 78(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(3) replaced 24 February 2016 section 78(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(5) amended 24 February 2016 section 78(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(8)(a) amended 24 February 2016 section 78(5) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(8)(ab) inserted 24 February 2016 section 78(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(8)(ac) inserted 24 February 2016 section 78(7) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(9)(b)(ib) inserted 24 February 2016 section 78(8) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(20) replaced 24 February 2016 section 78(9) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(21) heading replaced 24 February 2016 section 78(10) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(21) amended 24 February 2016 section 78(11) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(21)(a) amended 24 February 2016 section 78(12) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(21)(b) amended 24 February 2016 section 78(13) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(21)(c) amended 24 February 2016 section 78(14) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(21)(d)(i) replaced 24 February 2016 section 78(15) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(21)(d)(iv) replaced 24 February 2016 section 78(16) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CF 3(21)(d)(v) amended 24 February 2016 section 78(17) 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 2004 No 35 s CG 1
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:
ab: a liability is cancelled to the extent to which the person is released from it under the Insolvency Act 2006
i: being discharged from bankruptcy:
ii: being released under Part 5 subpart 1
b: a liability is cancelled to the extent to which the person is released from it under 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. Relationship with sections CG 2C to CG 2E
5: Sections CG 2C to CG 2E amount deduction dividend income income year New Zealand pay 2004 No 35 s CG 2 Section CG 2(4)(ab) inserted 30 March 2017 section 26(1) section 26(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CG 2(4)(b) amended 30 March 2017 section 26(2) section 26(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CG 2(5) heading replaced 30 March 2017 section 26(3) section 26(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CG 2(5) replaced 30 March 2017 section 26(3) section 26(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CG 2B: Remitted amounts on discharge from bankruptcy
Section CG 2B repealed 30 March 2017 section 27 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CG 2C: Remitted and other amounts: companies in liquidation
When this section applies
1: This section applies when—
a: a company that is part of a group of companies ( company A
b: company A's liability for the amount is later remitted or cancelled, wholly or partly; and
c: company A includes some or all of the amount of the deduction in the calculation of a net loss for a tax year; and
d: the net loss is a tax loss component included in a tax loss of company A for a tax year under section IA 2(2) or (3)
e: after the inclusion of the amount of the deduction in its net loss, company A makes some or all of the tax loss available to another company in the group ( company B
f: after making the tax loss available to company B, and at a time when company A and company B are in the same group of companies, company A is liquidated, struck off, or otherwise removed from the register of companies. Income of profit company
2: An amount equal to the amount remitted or cancelled is income of company B. Timing of income
3: Company B is treated as deriving the income on the date on which company A is liquidated, struck off, or otherwise removed from the register of companies. No application to financial arrangements
4: This section does not apply to a liability that is a financial arrangement, whether or not the liability has been remitted or cancelled. Relationship with other provisions
5: This section—
a: overrides section CG 2
b: is modified by section FM 5(4)
c: does not apply to a company to which section FO 4
d: is modified by section FO 5
e: is overridden by sections IC 11 IC 12 amount company deduction financial arrangement group of companies income liquidation net income net loss pay tax loss tax loss component tax year Section CG 2C inserted 30 June 2014 section 18(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CG 2D: Remitted and other amounts: companies leaving groups
When this section applies
1: This section applies when—
a: a company that is part of a group of companies ( company C
b: company C includes some or all of the amount of the deduction in the calculation of a net loss for a tax year; and
c: the net loss is a tax loss component included in a tax loss of company C for the tax year under section IA 2(2) or (3)
d: after the inclusion of the amount of the deduction in the calculation of its net loss, company C makes some or all of the tax loss available to another company in the group ( company D
e: after the tax loss is made available to company D,—
i: either company C or company D, or both, leave the group; and
ii: at the date of the departure, company C is in liquidation, receivership, or does not satisfy the solvency test set out in section 4
f: the liability referred to in paragraph (a) remains unpaid at the date on which either company C or company D, or both, leaves the group. Income of profit company
2: An amount equal to the amount of the unpaid liability referred to in subsection (1)(f) is income of company D. Timing of income
3: Company D is treated as deriving the income immediately before the date on which either company C or company D, or both, leaves the group. When subsection (5) applies
4: Subsection (5) applies for the purposes of subsection (1)(e)(ii) when—
a: a transaction results in an amount being received by a creditor of company C within a period of 2 years before either company C or company D, or both, leaves the group; and
b: the payment of the amount reduces, in whole or in part, the liability of company C so that company C satisfies the solvency test set out in section 4 Commissioner's discretion
5: The Commissioner may treat company C as not satisfying the solvency test set out in section 4
a: the amount is paid when company C is insolvent; and
b: the payment has allowed the creditor to receive more towards the satisfaction of a debt owed by company C than the creditor would receive or would be likely to receive if company C were placed in liquidation on the day on which company C or company D, or both, leaves the group. No application to financial arrangements
6: This section does not apply to a liability that is a financial arrangement, whether or not the liability has been remitted or cancelled. Relationship with other provisions
7: This section—
a: overrides section CG 2
b: is modified by section FM 5(4)
c: is overridden by sections IC 11 IC 12 amount arrangement Commissioner company deduction financial arrangement group of companies income liquidation net income net loss pay tax loss tax loss component tax year Section CG 2D inserted 30 June 2014 section 18(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CG 2E: Remitted and other amounts: income apportionment
When this section applies
1: This section applies when—
a: an amount of income is treated as having been derived by a company under section CG 2C CG 2D
b: in relation to the income, some or all of a tax loss of a company that is part of a group of companies has been made available to more than 1 company in the group. Apportionment
2: The company that is treated as deriving the income may choose to apportion the income among other companies in the group. Limited amount
3: The amount of the income referred to in subsection (2) must be no more than the total tax loss referred to in section CG 2C(1)(e) CG 2D(1)(d) Default apportionment
4: If the company that is treated as deriving the income does not make an apportionment under subsection (2), the income must be divided equally among the companies in the group. Companies in group
5: For the purposes of subsections (2) and (4),—
a: the company that made the tax loss available is treated as excluded from the group:
b: the company must be part of the group of companies at the date on which section CG 2C(3) CG 2D(3) Application to consolidated groups
6: This section does not apply to a company that is part of a consolidated group of companies, for which, see section FM 5(3) to (5) amount company consolidated group group of companies income tax loss tax year Section CG 2E inserted 30 June 2014 section 18(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
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 2004 No 35 s CG 3
CG 4: Receipts for expenditure or loss from insurance, indemnity, or otherwise
When this section applies
1: This section applies when—
a: a person is allowed a deduction for expenditure or loss; and
b: the person derives an amount relating to the expenditure or loss, whether through insurance, indemnity, or otherwise; and
c: the amount, to the extent of the deduction, is not income of the person under any other provision of this Act. Income
2: The amount derived is, to the extent of the deduction, income of the person. Timing of income
3: The income is allocated to the later of—
a: the income year in which the expenditure or loss is incurred:
b: the income year in which the amount is derived. amount deduction income year loss Section CG 4 replaced 2 November 2012 section 12(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
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 pay superannuation scheme 2004 No 35 s CG 5
CG 5B: Receipts from insurance, indemnity, or compensation for interruption or impairment of business activities
When this section applies
1: This section applies when a person receives an amount of insurance, indemnity, or compensation for an interruption or impairment of business activities resulting from an event. Income
2: The amount is income of the person to the extent to which it is attributable to income (the replaced income
a: the person would have derived if not for the event:
b: another person, who assigned the right to receive the amount to the person, would have derived if not for the event. Timing of income
3: The income is allocated to the later of—
a: the income year to which the replaced income relates:
b: the earlier of—
i: the income year in which the amount is received:
ii: the income year in which the amount is reasonably able to be estimated. amount business income income year Section CG 5B inserted 29 August 2011 section 5 Taxation (Tax Administration and Remedial Matters) Act 2011 Section CG 5B(2) replaced 26 June 2019 section 45(1) section 45(2) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section CG 5B(3) replaced 2 November 2012 section 13(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
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 an income 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 trading stock 2004 No 35 s CG 6
CG 7: Recoveries after deduction of payments under lease
When this section applies
1: This section applies, for the purposes of section FA 5
a: a person leases, rents, or hires an asset that is—
i: plant, machinery, or other equipment; or
ii: a motor vehicle; or
iii: a temporary building; and
b: they are allowed a deduction for the rental payments; and
c: they acquire the asset and later dispose of it for an amount that is more than the amount paid to acquire the asset. Income
2: The amount described in subsection (3) is income of the person. Consideration less payments or total deductions
3: The amount is the lesser of the amount by which the consideration on disposal is more than—
a: the sum of the payments made; or
b: the total amount of the deductions referred to in subsection (1)(b). Timing of income
4: The income is allocated to the income year of the disposal of the asset. amount deduction dispose income income year motor vehicle pay temporary building 2004 No 35 s FC 5(1)
CG 7B: Disposals or applications after earlier deductions
When this section applies
1: This section applies when a person—
a: has a deduction under section DB 19 DB 37 DB 40BA
b: acquires property (the application property
c: disposes of the application property for consideration or uses the application property in the lodging of a patent application with a complete specification or a design registration application, Income: affecting cost in section EE 25, base value in section EE 57
2: The person has income of the amount described in—
a: subsection (3), if the application property is disposed of for consideration, in the income year of the disposal; or
b: subsection (4), if the application property is used in the lodging of a patent application with a complete specification or a design registration application, Lesser of total deductions and consideration from disposal
3: The amount is—
a: the amount of the consideration derived for the disposal that is not income under another provision of this Act, if that amount is less than the total amount of deductions referred to in subsection (1)(a); or
b: the total amount of deductions referred to in subsection (1)(a), if paragraph (a) does not apply. Deductions in acquiring property
4: The amount is the total amount of deductions referred to in subsection (1)(a) for expenditure incurred in acquiring the application property. deduction design registration application dispose income plant variety rights Section CG 7B inserted 30 June 2014 section 19(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CG 7B(1)(c) amended 24 February 2016 section 79(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CG 7B(2)(b) amended 24 February 2016 section 79(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CG 7B list of defined terms design registration application inserted 24 February 2016 section 79(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CG 7C: Disposal or rerecognition of derecognised non-depreciable assets
When this section applies
1: This section applies when, for a non-depreciable intangible asset, a person has been allowed a deduction under section DB 34
a: the intangible asset is disposed of in an income year for consideration that is not income under another provision of this Act:
b: the intangible asset is rerecognised for financial reporting purposes in an income year. Disposal for consideration
2: If subsection (1)(a) applies, an amount equal to the deduction described in subsection (1) is income of the person for the income year, unless subsection (3) applies. Special case: disposal for consideration less than deduction
3: If subsection (1)(a) applies and the consideration is less than the deduction described in subsection (1), then, despite subsection (2), an amount equal to the consideration is income of the person for the income year. Rerecognition
4: If subsection (1)(b) applies, an amount equal to the deduction described in subsection (1) is income of the person for the income year. Relationship with subpart EE
5: For the purposes of subpart EE deduction dispose income income year Section CG 7C inserted 24 February 2016 section 80(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CG 8: Capital contributions
When this section applies
1: This section applies for the income year (the first year Income
2: For an income year, the amount given by the following formula is income of the person derived in that income year: capital contribution ÷ 10. Definition of item in formula
3: In the formula, capital contribution Exception
4: This section does not apply for the capital contribution if the person has chosen, in accordance with section DB 64(1)(c) amount capital contribution income income year return of income Section CG 8 added 28 May 2010 section 75(1) Taxation (Budget Measures) Act 2010
CG 8B: Recoveries after deductions for high-priced bloodstock removed from New Zealand
When this section applies
1: This section applies when—
a: high-priced bloodstock is removed from New Zealand before being—
i: first raced in New Zealand:
ii: used for breeding in New Zealand; and
b: a person who is a prospective bloodstock breeder has been allowed a deduction in relation to the high-priced bloodstock; and
c: the high-priced bloodstock is expected, at the time of its removal from New Zealand, to be able to be used for future breeding. Income
2: The person has an amount of income to the extent to which the greater of the high-priced bloodstock’s market value on the day on which it is removed from New Zealand and the total amount of deductions the person has been allowed in relation to the high-priced bloodstock exceeds the total of any amounts of income the person has derived in relation to the high-priced bloodstock. Timing of income
3: The income is allocated to the income year in which the high-priced bloodstock is removed from New Zealand. amount deduction high-priced bloodstock income income year New Zealand prospective bloodstock breeder Section CG 8B inserted 18 March 2019 section 133(1) section 133(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
CG 8C: Recoveries after deductions for high-priced bloodstock disposed of to non-residents
When this section applies
1: This section applies when—
a: a person who is a prospective bloodstock breeder ( person A person B
i: first raced in New Zealand:
ii: used for breeding in New Zealand:
iii: removed from New Zealand; and
b: person A has been allowed a deduction in relation to the high-priced bloodstock; and
c: the high-priced bloodstock is expected, at the time of the disposal, to be able to be used for future breeding. Income
2: The amount described in subsection (3) is income of person A. Amount of income
3: The amount is the greater of—
a: the amount of consideration receivable by person A for disposing of the high-priced bloodstock; and
b: the amount given by the formula in subsection (4). Formula
4: For the purposes of subsection (3)(b), the amount is calculated using the formula— ownership disposal percentage × total deductions. Definition of items in formula
5: In the formula,—
a: ownership disposal percentage
b: total deductions Timing of income
6: The income is allocated to the income year in which the high-priced bloodstock is disposed of. Relationship with section CB 2
7: This section overrides section CB 2(2) amount deduction dispose high-priced bloodstock income income year New Zealand prospective bloodstock breeder Section CG 8B inserted 18 March 2019 section 133(1) section 133(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
CG 9: Recovery of deductions for aircraft engine overhaul
An amount of recovery income that a person has under section EJ 27 Section CG 9 inserted 1 April 2017 section 28 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
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
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, calculated under section ED 1 excepted financial arrangement income income year original share revenue account property share-lending right share supplier trading stock 2004 No 35 s CH 1
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 2004 No 35 s CH 2
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 pay 2004 No 35 s CH 3 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 2004 No 35 s CH 4 Goods and services tax (GST)
CH 5: Adjustment for GST
Income
1: An adjustment taken into account under section 20(3)(e) Exclusion
2: This section does not apply to an adjustment made in relation to a capital asset. Timing of income
3: The income is allocated to the income year in which the amount is calculated. amount income income year 2004 No 35 s CH 5 Section CH 5(1) amended 1 April 2011 section 31(1) Taxation (GST and Remedial Matters) Act 2010 Section CH 5(2) substituted 1 April 2011 section 31(2) Taxation (GST and Remedial Matters) Act 2010 Section CH 5(3) list of defined terms taxable supply repealed 1 April 2011 section 31(3) Taxation (GST and Remedial Matters) Act 2010
CH 5B: Adjustments for certain flat-rate credits under platform economy rules
Who this section applies to
1: This section applies to a person who, under the Goods and Services Tax Act 1985
a: is an underlying supplier of goods and services; and
b: has an amount of a flat-rate credit, as defined in section 2(1) Income
2: The amount of the credit received by the person is income of the person for the income year. amount assessable income income income year Section CH 5B inserted 29 March 2025 section 17(1) section 17(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Finance leases
CH 6: Adjustments for certain finance and operating leases
When this section applies
1: This section applies when an adjustment is made under section FA 11 FA 11B Income: leases that become finance leases
2: The amount of a positive adjustment under section FA 11 Income: operating leases entered into before 20 June 2007
3: The amount of the adjustment under section FA 11B amount finance lease income income year lease operating lease 2004 No 35 ss FC 8H(6) FC 8I(6) Section CH 6 substituted 1 April 2008 section 321 Taxation (Business Taxation and Remedial Matters) Act 2007 Avoidance and non-market transactions
CH 7: Adjustment for avoidance arrangements
An amount treated as income of a person under any of the following sections is income of the person:
a: section GA 1
b: section GB 23
c: section GB 26
d: section GB 29
e: section GB 46 amount arrangement Commissioner income relative
CH 8: Market value substituted
Transfer pricing arrangements
1: An amount treated as income of a person under section GC 8 Disposal at below market value
2: A person may be treated as deriving an amount—
a: on disposal of trading stock under section GC 1 Certain disposals
b: on the lease of a property under section GC 5 amount income lease trading stock Section CH 8(1) amended 28 March 2024 section 17(1) section 17(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CH 8(2)(a) amended 1 April 2024 section 17(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Interest apportionment on thin capitalisation
CH 9: Interest apportionment: excess debt entity
When this section applies
1: This section applies when an excess debt entity is required under section FE 6 Income
2: The amount calculated under section FE 6(2) amount excess debt entity income income year interest 2004 No 35 s FG 8(1)
CH 10: Interest apportionment: reporting bank
When this section applies
1: This section applies when a reporting bank is required under section FE 7 Income
2: The amount calculated under section FE 7(2) amount income income year interest measurement period reporting bank 2004 No 35 s FG 8B(1)
CH 10B: Interest apportionment: public project debt
When this section applies
1: This section applies when an excess debt entity is required under section FE 7B Income
2: The amount calculated under section FE 7B(3) amount excess debt entity income income year interest public project debt Section CH 10B inserted 1 July 2018 section 5(1) section 5(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Expenditure other than for entities’ purposes Heading inserted 21 March 2017 section 26(2) Te Awa Tupua (Whanganui River Claims Settlement) Act 2017
CH 11: Te Awa Tupua and Te Pou Tupua
When this section applies
1: This section applies when Te Pou Tupua, as defined in the Te Awa Tupua (Whanganui River Claims Settlement) Act 2017 Part 2 Income: amount of expenditure
2: Te Pou Tupua is treated as deriving income for the income year of an amount amount income income year Section CH 11 inserted 21 March 2017 section 26(2) Te Awa Tupua (Whanganui River Claims Settlement) Act 2017 Section CH 11(2) amended 29 March 2018 section 23(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CH 11 list of defined terms amount inserted 29 March 2018 section 23(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CH 11 list of defined terms income inserted 29 March 2018 section 23(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CH 11 list of defined terms income year inserted 29 March 2018 section 23(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CH 11B: Te Kāhui Tupua and Te Tōpuni Kōkōrangi
When this section applies
1: This section applies when Te Tōpuni Kōkōrangi (as defined in Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025 Part 3 Income: amount of expenditure
2: Te Tōpuni Kōkōrangi is treated as deriving income for the income year of an amount equal to the amount of the expenditure. Section CH 11B inserted 2 February 2025 section 57(2) Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025
CH 11C: Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025 asset management company
When this section applies
1: This section applies when the asset management company (as defined in Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025 Part 4 Income: amount of expenditure
2: The asset management company is treated as deriving income for the income year of an amount equal to the amount of the expenditure. Section CH 11C inserted 2 February 2025 section 57(2) Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025 Financial instruments and hybrid mismatches Heading inserted 1 July 2018 section 6(1) section 6(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018
CH 12: Income from hybrid mismatch arrangement
An amount is assessable income if it is treated as assessable income under subpart FH amount assessable income Section CH 12 inserted 1 July 2018 section 6(1) section 6(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Feasibility expenditure clawback Heading inserted 30 March 2021 section 18(1) section 18(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
CH 13: Feasibility expenditure clawback
When this section applies
1: This section applies when a person—
a: has deducted an amount under section DB 66(3)
b: subsequently completes or creates the property, or acquires the property or similar property. When this section does not apply
2: Despite subsection (1), this section does not apply for an income year that is more than 7 years after the last income year for which a person has deducted an amount under section DB 66(3) Income
3: The person has, in the income year in which they subsequently complete, create, or acquire the property or similar property, income equal to the amount of the total deductions under section DB 66(3) amount deduction income income year person Section CH 13 inserted 30 March 2021 section 18(1) section 18(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
CO: Income from voluntary activities
Subpart CO inserted 6 October 2009 section 27(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Contents
CO 1: Income from voluntary activities
Income
1: An amount derived by a person in undertaking a voluntary activity is income of the person. Relationship with section CW 62B
2: This section is overridden by section CW 62B amount income Section CO 1 inserted 6 October 2009 section 27(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CP: Income from portfolio investment entities
Contents
CP 1: Attributed income of investors in multi-rate PIEs
When this section applies
1: This section applies when a multi-rate PIE attributes an amount of income for an income year calculated under sections HM 35 HM 35C HM 36 Income
2: The amount is income of the person in the income year of the person in which the PIE’s income year ends. amount income income year investor multi-rate PIE PIE 2007 No 97 s CP 1 Section CP 1 substituted 1 April 2010 section 28(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CP 1(1) amended 29 August 2011 section 6 Taxation (Tax Administration and Remedial Matters) Act 2011
CQ: Attributed income from foreign equity
Contents
Attributed controlled foreign company income
CQ 1: Attributed controlled foreign company income
Attributed controlled foreign company (CFC) income of a person is income. attributed CFC income controlled foreign company income 2004 No 35 s CQ 1
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
bb: the person is not a portfolio investment entity; 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, under sections EX 14 to EX 17
f: either—
i: the CFC has net attributable CFC income for the accounting period under section EX 20C
ii: the special rule in section EX 19
g:
h: the CFC is not a non-attributing active CFC for the accounting period, under section EX 21B
i: the CFC is not a non-attributing Australian CFC for the accounting period, under section EX 22 Special rule: taxable distributions under the attributable FIF income method
2: A person also has attributed CFC income section EX 50(5) Attributable FIF income method
a: the person has an attributing interest in a foreign investment fund (FIF); and
b: the person is using the attributable FIF income method
c: the FIF receives a taxable distribution from a non-complying trust. Special rule: attributed CFC amount from personal services
2B: If a person and a non-attributing active CFC or non-attributing Australian CFC meet the requirements of subsection (1)(a) to (e) and the CFC derives income from personal services that is an attributable CFC amount under section EX 20B(3)(h) attributed CFC income
a: the person's income interest in the CFC:
b: the amount by which the CFC's income from personal services exceeds the expenditure incurred by the CFC in deriving the income from personal services. Treated as derived while person New Zealand resident
3: Attributed CFC income of a person who has stopped being a New Zealand resident is treated as being derived while the person was a New Zealand resident. Dividend income can arise
4: accounting period attributable CFC amount attributed CFC income attributable FIF income method attributing interest CFC distribution dividend FIF FIF income foreign company grey list income income interest income year net attributable CFC income New Zealand resident non-attributing active CFC non-attributing Australian CFC non-complying trust portfolio investment entity taxable distribution transitional resident 2004 No 35 s CQ 2 Section CQ 2(1)(bb) inserted 7 May 2012 section 7(1) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 2(1)(f)(i) substituted 6 October 2009 section 29(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2(1)(g) repealed 6 October 2009 section 29(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2(1)(h) added 6 October 2009 section 29(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2(1)(i) added 6 October 2009 section 29(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2(2) heading replaced 24 February 2016 section 81(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CQ 2(2) amended 7 May 2012 section 7(2) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 2(2)(b) amended 7 May 2012 section 7(3) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 2(2B) heading inserted 6 October 2009 section 29(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2(2B) inserted 6 October 2009 section 29(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2(4) heading repealed 6 October 2009 section 29(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2(4) repealed 6 October 2009 section 29(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2 list of defined terms attributable CFC amount inserted 6 October 2009 section 29(5)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2 list of defined terms attributable FIF income method inserted 7 May 2012 section 7(4)(b) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 2 list of defined terms attributed repatriation repealed 24 February 2016 section 81(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CQ 2 list of defined terms branch equivalent income repealed 6 October 2009 section 29(5)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2 list of defined terms branch equivalent method repealed 7 May 2012 section 7(4)(a) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 2 list of defined terms net attributable CFC income inserted 6 October 2009 section 29(5)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2 list of defined terms non-attributing active CFC inserted 6 October 2009 section 29(5)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2 list of defined terms non-attributing Australian CFC inserted 6 October 2009 section 29(5)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 2 list of defined terms portfolio investment entity inserted 7 May 2012 section 7(4)(b) Taxation (International Investment and Remedial Matters) Act 2012
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 2004 No 35 s CQ 3 Foreign investment fund income
CQ 4: Foreign investment fund income
FIF income of a person is income. FIF income income 2004 No 35 s CQ 4
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 25, 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 section EX 29
c: at that time, the rights are not exempt from being an attributing interest in a FIF under any of—
i: the exemption for ASX-listed Australian companies in section EX 31
ii: the exemption for Australian unit trusts with 25% turnover in section EX 32
iii: the exemption for Australian regulated superannuation savings in section EX 33
iv: the CFC rules exemption in section EX 34
v: the exemption in section EX 35
vi: the 10-year exemption for a venture capital company emigrating to a grey list country in section EX 36
vii: the 10-year exemption for a grey list company owning a New Zealand venture capital company in section EX 37
viib: the exemption for shares in a grey list company acquired under a venture investment agreement in section EX 37B
viii: the exemption for an employee share section EX 38 (Exemptions for employee share schemes)
ix:
x:
xi: the foreign exchange control exemption in section EX 40
xii: the exemption for a non-resident or transitional resident in section EX 41
xiii:
xiva: the exemption for an interest in a foreign superannuation scheme that is not a FIF superannuation interest in section EX 42B
xiv: the annuity section EX 43 exception):
xv: an exemption for a non-attributing active FIF sections EX 50 EX 18A(2)(b)(i) EX 21B
d: if the person is a natural person
i: the total cost, calculated under section EX 68
ii: the person includes, in a return for the year, FIF income or loss from an attributing interest in a FIF:
iii: the person has, in the return for 1 of the preceding 4 income years (the earlier year section EX 68
e: if the person is acting as trustee of a trust that meets the requirements of subsection (5),—
i: the total cost, calculated under section EX 68
ii: the person includes, in a return for the year, FIF income or loss from an attributing interest in a FIF:
iii: the person has, in the return for 1 of the preceding 4 income years (the earlier year section EX 68
f: 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
g: under the relevant calculation method chosen by the person, an income amount is calculated for the year under sections EX 44 to EX 56 EX 60 EX 61 Treatment of transaction under section EX 63, EX 65, or EX 67
1B: If a person is treated under section EX 63(5) EX 65 EX 67 Look-through calculation methods
2: Despite subsection (1), if the calculation method is the attributable FIF income 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 (f) are applied on the basis that references in subsection (1)(a), (b), (c), and (f) to any time in the year are read as references to any time in the relevant accounting period. FIF income from CFC with FIF interest
3: FIF income section EX 58 regardless of whether the CFC is a non-attributing active CFC under section EX 21B section EX 22 Treated as derived while person New Zealand resident
4: FIF income of a person who has stopped being a New Zealand resident is treated as being derived while the person was a New Zealand resident. Requirements for trustees
5: Subsection (1)(e) applies to the trustee of a trust for an income year if—
a: 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:
b: 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; and
ii: is required by a court order to pay damages or compensation to the beneficiary:
c: 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:
d: the settlor of the trust is the Accident Compensation Corporation. accounting period amount associated person attributable FIF income method attributing interest calculation method CFC employee share scheme FIF FIF income FIF superannuation interest foreign company foreign superannuation scheme grey list grey list company income income interest income year life insurance policy loss New Zealand resident non-attributing Australian CFC non-resident relative settlor shareholder transitional resident trustee unit trust venture investment agreement 2004 No 35 s CQ 5 Section CQ 5(1)(c)(iii) replaced 24 February 2016 section 82(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CQ 5(1)(c)(v) replaced 7 May 2012 section 8(1) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 5(1)(c)(viib) inserted 29 March 2025 section 18(1) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CQ 5(1)(c)(viii) amended 31 March 2023 section 19(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CQ 5(1)(c)(viii) amended 29 September 2018 section 24(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CQ 5(1)(c)(ix) repealed 30 March 2025 section 18(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CQ 5(1)(c)(x) repealed 30 March 2025 section 18(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CQ 5(1)(c)(xiii) repealed 1 April 2014 section 9 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CQ 5(1)(c)(xiva) inserted 29 March 2025 section 18(3) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CQ 5(1)(c)(xiv) amended 24 February 2016 section 82(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CQ 5(1)(c)(xiv) amended 7 May 2012 section 8(2) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 5(1)(c)(xv) inserted 7 May 2012 section 8(2) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 5(1)(c)(xv) amended 30 March 2017 section 29(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CQ 5(1)(d) replaced 7 May 2012 section 8(3) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 5(1)(d) amended 29 March 2018 section 258 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CQ 5(1)(e) replaced 7 May 2012 section 8(3) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 5(1B) heading inserted 1 April 2008 section 322(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CQ 5(1B) inserted 1 April 2008 section 322(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CQ 5(2) amended 7 May 2012 section 8(4) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 5(3) heading substituted 6 October 2009 section 30(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 5(3) substituted 6 October 2009 section 30(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 5(3) amended 24 February 2016 section 82(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CQ 5 list of defined terms accounting profits method repealed 7 May 2012 section 8(5)(a) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 5 list of defined terms attributable FIF income method inserted 7 May 2012 section 8(5)(b) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 5 list of defined terms branch equivalent method repealed 7 May 2012 section 8(5)(a) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 5 list of defined terms employee share scheme inserted 31 March 2023 section 19(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CQ 5 list of defined terms FIF superannuation interest inserted 29 March 2025 section 18(5) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CQ 5 list of defined terms loss inserted 7 May 2012 section 8(5)(b) Taxation (International Investment and Remedial Matters) Act 2012 Section CQ 5 list of defined terms non-attributing active FIF repealed 29 September 2018 section 24(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CQ 5 list of defined terms non-attributing Australian CFC inserted 6 October 2009 section 30(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CQ 5 list of defined terms settlor inserted 24 February 2016 section 243 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CQ 5 list of defined terms venture investment agreement inserted 29 March 2025 section 18(4) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CQ 6: Calculation of FIF income
The amount of any FIF income is calculated, using the relevant calculation method, under sections EX 44 to EX 61 amount calculation method FIF income 2004 No 35 s CQ 6
CQ 7: Treatment of attributing interests subject to returning share transfer
Section CQ 7 repealed 6 October 2009 section 31 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CR: Income from insurance
Subpart CR heading substituted 6 October 2009 section 32 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Contents
CR 1: Policyholder base income of life insurer
If, but for this section, a life insurer has an amount of policyholder base income for an income year, and that amount is not income under this Part, the amount is income of the life insurer for the income year. amount income income year life insurer policyholder base income Section CR 1 substituted 1 July 2010 section 33(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CR 2: Shareholder base income of life insurer
If, but for this section, a life insurer has an amount of shareholder base income for an income year, and that amount is not income under this Part, the amount is income of the life insurer for the income year. amount income income year life insurer shareholder base income Section CR 2 substituted 1 July 2010 section 33(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CR 3: Income of non-resident general insurer
What this section applies to
1: This section applies to a premium that is treated as having a source in New Zealand section YD 8
a: an insured person pays the premium to an insurer for insurance of any of the kinds described in subsection (3); and
b: the premium meets all 3 conditions in subsection (4); and
c: the premium is not excluded from the application of this section by section YD 8(6) Amount of income
2: Ten percent of the gross premium derived by the insurer is income of the insurer. Kinds of insurance
3: The kinds of insurance referred to in subsection (1)(a) are—
a: general insurance:
b: a guarantee against risk given by an insurer to an insured person if—
i: the insured person is liable to pay a premium to the insurer for the guarantee; and
ii: the insured person is associated with the insurer:
c: a guarantee against risk given by an insurer to an insured person if—
i: the insured person is liable to pay a premium to the insurer for the guarantee; and
ii: the risk arises from money lent to the insured person; and
iii: 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
iv: 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. Conditions for premium
4: The premium referred to in subsection (1)(b) is—
a: a premium derived by an insurer who is not resident in New Zealand when they derive it:
b: a premium that is not attributable to a fixed establishment of the insurer in New Zealand through which they carry on business in New Zealand:
c: a premium to which at least 1 of the following applies:
i: the insured person from whom the premium is derived is resident in New Zealand; or
ii: the insurance contract from which the premium is derived is offered or entered into in New Zealand; or
iii: 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. amount business fixed establishment general insurance gross income insurance insurance contract insured person insurer money lent New Zealand non-resident offered or entered into in New Zealand pay premium resident in New Zealand source in New Zealand 2004 No 35 ss FC 13 FC 14(2) Section CR 3(1) amended 21 December 2010 section 32(1) Taxation (GST and Remedial Matters) Act 2010 Section CR 3 derived from New Zealand repealed 21 December 2010 section 32(2)(a) Taxation (GST and Remedial Matters) Act 2010 Section CR 3 source in New Zealand inserted 21 December 2010 section 32(2)(b) Taxation (GST and Remedial Matters) Act 2010
CR 3B: Lloyd’s of London: income from life insurance premiums
What this section applies to
1: This section applies to a premium a portion of which is treated as having a source in New Zealand under section YD 8B
a: the policyholder pays the premium for a life insurance policy to Lloyd’s of London or an agent of Lloyd’s of London; and
b: the life insurance policy is described in subsection (3); and
c: the life insurance policy is offered or was offered or entered into within New Zealand. Amount of income
2: Ten percent of the gross premium derived by Lloyd’s of London is income of Lloyd’s of London. Types of life insurance policies
3: The life insurance policy referred to in subsection (1) is a life insurance policy that—
a: is made available to the general public; and
b: is not a profit participation policy or a savings product policy or both; and
c: does not provide for a benefit that is an annuity. income life insurance policy Lloyd’s of London offered or was offered or entered into pay premium profit participation policy savings product policy source in New Zealand Section CR 3B inserted 29 March 2018 section 25(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CR 4: Income for general insurance outstanding claims reserve
What this section applies to
1: This section applies for—
a: an insurer who—
i: uses IFRS 4, Appendix D or IFRS 17
ii: is a life insurer who has general insurance contracts; and
b: general insurance contracts, excluding contracts having premiums to which section CR 3 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 opening outstanding claims reserve − closing 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 closing outstanding claims reserve, for general insurance contracts not referred to in subparagraph (iii), used by the insurer for tax purposes for the prior year, if the current year is the first year for which this section applies to the insurer, or for which the insurer adopts IFRS 17, or for which the insurer applies for the first time in a tax calculation the definition of present value (gross) section EY 24(5)
iii: the amount calculated using the formula in section DW 4(4B) section ED 3(1B)
b: closing outstanding claims reserve amount IFRS 4 IFRS 17 income income year insurer life insurer outstanding claims reserve premium present value (gross) Section CR 4 added 6 October 2009 section 34(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CR 4(1)(a)(i) amended 31 March 2023 section 20(1) section 20(4) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CR 4(3)(a)(ii) replaced 31 March 2023 section 20(2) section 20(4) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CR 4(1B) heading inserted 17 July 2013 section 11(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CR 4(1B) inserted 17 July 2013 section 11(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CR 4(3)(a) replaced 1 April 2014 section 10 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CR 4 general insurance contract repealed 7 September 2010 section 11(b) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CR 4 list of defined terms IFRS 17 inserted 31 March 2023 section 20(3) section 20(4) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CR 4 premium added 7 September 2010 section 11(a) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CR 4 list of defined terms present value (gross) inserted 31 March 2023 section 20(3) section 20(4) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CS: Superannuation funds
Subpart CS repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Contents
Withdrawals Heading repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 1: Withdrawals
Section CS 1 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Exclusions Heading repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 2: Exclusions of withdrawals of various kinds
Section CS 2 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 3: Exclusion of withdrawal on grounds of hardship
Section CS 3 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 4: Exclusion of withdrawal to settle division of relationship property
Section CS 4 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 5: Exclusion of withdrawal paid as annuity or pension
Section CS 5 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 6: Exclusion of withdrawal on partial retirement
Section CS 6 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 7: Exclusion of withdrawal when member ends employment
Section CS 7 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 8: Exclusion of withdrawal when member ends employment: lock-in rule
Section CS 8 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 9: Exclusion of withdrawal from defined benefit fund when member ends employment
Section CS 9 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 10: When member treated as not ending employment
Section CS 10 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 10B: Exclusion of permitted withdrawals from KiwiSaver schemes and complying superannuation funds
Section CS 10B repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Transfers to or from superannuation funds and superannuation schemes Heading repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 11: Transfer by superannuation fund to another superannuation fund
Section CS 11 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 12: Transfer from superannuation scheme to superannuation fund
Section CS 12 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 13: Investment by superannuation fund in another superannuation fund
Section CS 13 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Treatment of amounts when superannuation fund becomes superannuation scheme or vice versa Heading repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 14: Superannuation fund becomes superannuation scheme
Section CS 14 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 15: Superannuation fund becomes foreign superannuation scheme
Section CS 15 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 16: Superannuation scheme becomes superannuation fund
Section CS 16 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Treatment of distributions when superannuation fund wound up Heading repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 17: Superannuation fund wound up
Section CS 17 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Treatment of loans to members Heading repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CS 18: Value of loan treated as fund income
Section CS 18 repealed 1 April 2011 section 12 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
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 43
3: This section is overridden by section CX 43 arrangements for mining operations Relationship with section CZ 32
4: Section CZ 32 consideration dispose exploratory material income petroleum miner petroleum mining asset 2004 No 35 s CT 1 Section CT 1(3) amended 1 April 2014 section 11 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CT 1(4) heading inserted 30 June 2014 section 20 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CT 1(4) inserted 30 June 2014 section 20 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
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 2004 No 35 s CT 2
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 2004 No 35 s CT 3
CT 4: Partnership interests and disposal of part of asset
In this subpart, and in sections CX 42 CX 43 arrangements for mining operations
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 2004 No 35 s CT 4 Section CT 4 amended 1 April 2014 section 12 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CT 5: Petroleum mining operations outside New Zealand
This subpart, and sections CX 42 CX 43 arrangements for mining operations petroleum mining operations that are, or decommissioning that is
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 42 CX 43 controlled foreign company decommissioning New Zealand petroleum miner petroleum mining operations 2004 No 35 s CT 5 Section CT 5 amended 1 April 2018 section 26(1) section 26(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CT 5 amended 1 April 2014 section 13 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CT 5 list of defined terms decommissioning inserted 1 April 2018 section 26(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CT 5B: Resuming commercial production
When this section applies
1: This section applies when a petroleum miner or a farm-in party undertakes commercial production in a permit area when a petroleum miner, or a farm-in party, has received a deduction under section EJ 13 Income
2: An amount described in subsection (3) is treated as income of the petroleum miner who, at any time after the petroleum mining operations have ceased under section EJ 13
a: undertakes commercial production (the resumed commercial production
b: arranges for a farm-in party to undertake the resumed commercial production in the permit area. Amount treated as income
3: The amount referred to in subsection (2) that is treated as income is an amount that is equal to the amount of the deduction allowed under section EJ 13 Allocation of income
4: The amount is allocated to the income year in which the resumed commercial production in the permit area begins. amount commercial production deduction farm-in party farm-out arrangement income income year permit area petroleum development expenditure petroleum miner petroleum mining asset petroleum mining operations petroleum permit Section CT 5B inserted 1 April 2018 section 27(1) section 27(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Definitions
CT 6: Meaning of petroleum miner
Meaning
1: Petroleum miner petroleum mining operations or decommissioning Exclusion
2: Petroleum miner petroleum mining operations or decommissioning
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 decommissioning permit area petroleum petroleum miner petroleum mining operations petroleum permit 2004 No 35 s CT 6 Section CT 6(1) substituted 1 April 2008 section 326(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6(1) amended 1 April 2018 section 28(1) section 28(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CT 6(2) amended 1 April 2018 section 28(2) section 28(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CT 6(3) heading repealed 1 April 2008 section 326(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6(3) repealed 1 April 2008 section 326(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6(4) heading repealed 1 April 2008 section 326(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6(4) repealed 1 April 2008 section 326(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6 list of defined terms decommissioning inserted 1 April 2018 section 28(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CT 6 list of defined terms petroleum mining operations inserted 1 April 2008 section 326(4)(a) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6 list of defined terms removal or restoration operations repealed 1 April 2008 section 326(4)(b) Taxation (Business Taxation and Remedial Matters) Act 2007
CT 6B: Meaning of petroleum mining operations
Meaning
1: Petroleum mining operations 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: 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 2004 No 35 s CT 6B Section CT 6B inserted 1 April 2008 section 327 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6B(2)(e) repealed 1 April 2018 section 29(1) section 29(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CT 6B list of defined terms removal or restoration operations repealed 1 April 2018 section 29(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
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
a: land:
b: an underground gas storage facility as that term is defined in section 2 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: decommissioning 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. decommissioning land permit area petroleum petroleum miner petroleum mining asset petroleum permit 2004 No 35 s CT 7 Section CT 7(2) replaced 30 June 2014 section 21 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CT 7(3)(d) amended 1 April 2018 section 30(1) section 30(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CT 7 list of defined terms decommissioning inserted 1 April 2018 section 30(2)(a) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CT 7 list of defined terms removal or restoration operations repealed 1 April 2018 section 30(2)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CU: Income from mineral mining
Subpart CU replaced 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Contents
CU 1: Mineral miner's income
An amount that a mineral miner derives from their mining operations or associated mining operations is income of the mineral miner. amount associated mining operations income mineral miner mining operations Section CU 1 replaced 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 2: Treatment of mining land
When this section applies
1: This section applies when—
a: a mineral miner acquires land or an interest in land for the purposes of current or intended mining operations or associated mining operations; and
b: the land—
i: constitutes a mining permit area or is land adjacent to it:
ii: forms, or is intended to form, part of a mining permit area or land adjacent to it. Income
2: An amount that the mineral miner derives from disposing of the land or interest in land is income of the mineral miner for the income year of disposal. amount associated mining operations income income year interest land mineral miner mining operations permit area Section CU 2 replaced 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 3: Disposal of mineral mining assets
Income
1: The consideration that a mineral miner derives from disposing of a mineral mining asset is income of the mineral miner. Relationship with section CX 43
2: This section is overridden by section CX 43 income mineral miner mineral mining asset Section CU 3 replaced 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 4: Recovery of certain expenditure
When this section applies
1: This section applies when—
a: a mineral miner incurs an amount of mining exploration expenditure in relation to their mining operations or associated mining operations; and
b: the mineral miner is allowed a deduction for the expenditure for an income year under section DU 1(1)(b)
c: the income year is later than the 2013–14 income year; and
d: the expenditure is incurred in an income year for which the mineral miner is required under section 22
e: the expenditure results in, produces, or generates an asset for the mineral miner; and
f: the mineral miner uses the asset for, or in relation to, the commercial production of a listed industrial mineral. Income
2: The mineral miner is treated as deriving income to the extent of the amount of expenditure that resulted in, produced, or generated the asset. However, the amount must not be more than the amount of the deduction referred to in subsection (1)(b). Timing
3: The income is allocated to the income year in which the mineral miner uses the asset for, or in relation to, the commercial production of the mineral. amount associated mining operations commercial production deduction income income year interest land listed industrial mineral mineral mineral miner mining exploration expenditure mining operations Section CU 4 replaced 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 5: Partnership interests and disposal of part of asset
In this subpart and subpart DU sections CX 43 GB 20
a: a partner is treated as having a share or interest in a mineral mining asset 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 mineral mining asset partner partnership Section CU 5 replaced 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Definitions Heading inserted 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 6: Meaning of mineral miner
Meaning
1: Mineral miner
a: the person's only source of income is the business described in subsection (2); or
b: the person's main source of income is the business described in subsection (2); or
c: the person's only activity is 1 of the activities described in subsection (3); or
d: the person's main activity is 1 of the activities described in subsection (3); or
e: the person proposes that their only activity or their 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 listed industrial 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 listed industrial mineral in New Zealand; or
b: performing development work for exploring, searching, or mining for a listed industrial 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 listed industrial mineral; or
b: arises wholly or mainly through participation in profits from the production of the listed industrial mineral. business income listed industrial mineral New Zealand Section CU 6 replaced 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 7: Some definitions
Meaning of mining operations
1: Mining operations
a: are carried on by a mineral miner in a permit area in New Zealand for the purpose of deriving income; and
b: consist of—
i: exploring, or searching for 1 or more listed industrial minerals; or
ii: performing development work for exploring, searching, or mining for 1 or more listed industrial minerals; or
iii: extracting 1 or more listed industrial minerals; or
iv: mining or performing work directly related to mining for 1 or more listed industrial minerals. Meaning of associated mining operations
2: 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 listed industrial 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. Meaning of initial treatment
3: For the purposes of subsection (2)(b)(ii), 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 listed industrial mineral not requiring concentration, a treatment that would have been applied before concentration if the 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. associated mining operations income initial treatment listed industrial mineral mineral mineral miner mining operations New Zealand permit area Section CU 7 replaced 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 8: Meaning of listed industrial mineral
Meaning
1: Listed industrial 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 an industrial mineral in a Minister to consider
2: Before giving a
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. Secondary legislation
3: A notice under subsection (1)(b) is secondary legislation ( see Part 3 listed industrial mineral mineral Minister New Zealand The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section CU 8 replaced 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CU 8(1)(b) amended 28 October 2021 section 3 Secondary Legislation Act 2021 Section CU 8(2) amended 28 October 2021 section 3 Secondary Legislation Act 2021 Section CU 8(3) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section CU 8(3) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
CU 9: Some definitions
Meaning of mineral mining asset
1: Mineral mining asset
a: a mining or prospecting right:
b: an exploration permit, a prospecting permit, or a mining permit:
c: a share or partial interest in an asset described in paragraph (a) or (b). Inclusion for particular purpose
2: For the purposes of section GB 20 Exclusion
3: A mineral mining asset does not include land. Meaning of mining or prospecting right
4: For the purposes of this section, 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 listed industrial mineral; and
b: includes a share or interest in any such authority, concession, easement, lease, licence, option, permit, privilege, right, or title. associated mining operations exploration permit land lease listed industrial mineral mineral miner mineral mining asset mining operations mining or prospecting right mining permit permit prospecting permit Section CU 9 replaced 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 10: Mining asset used to derive income other than income from mining
Section CU 10 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 11: Meaning of asset for sections CU 3 to CU 10
Section CU 11 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 12: Application of sections to resident mining operators
Section CU 12 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 13: Application of sections to non-resident mining operators
Section CU 13 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 14: Recovery of reinvestment profit on disposal of mining shares
Section CU 14 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 15: Recovery of reinvestment profit not used for mining purposes
Section CU 15 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 16: Recovery of reinvestment profit on repayment of loans
Section CU 16 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 17: Repayment by mining company of amount written off
Section CU 17 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 18: Amount treated as repayment for purposes of section CU 17: excess
Section CU 18 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 19: Amount treated as repayment for purposes of section CU 17: net income
Section CU 19 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 20: Mining company or mining holding company liquidated
Section CU 20 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Definitions Heading repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 21: Meaning of income from mining
Section CU 21 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 22: Meaning of mining company
Section CU 22 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 23: Meaning of mining development expenditure
Section CU 23 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 24: Meaning of mining exploration expenditure
Section CU 24 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 25: Meaning of mining operations
Section CU 25 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 26: Meaning of mining venture
Section CU 26 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 27: Meaning of resident mining operator
Section CU 27 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 28: Meaning of specified mineral
Section CU 28 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CU 29: Other definitions
Section CU 29 repealed 1 April 2014 section 14(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CV: Income specific to certain entities
Contents
CV 1: Group companies
Income
1: 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 part 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. Relationship with sections CB 15D and CB 15E
2: Subsection (1) is overridden by sections CB 15D CB 15E section CW 3C amount company income income year wholly-owned group of companies 2004 No 35 s CV 1 Section CV 1(1) heading inserted 18 March 2019 section 134(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CV 1(2) heading amended 29 March 2025 section 19(1) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CV 1(2) inserted 18 March 2019 section 134(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CV 1(2) amended 29 March 2025 section 19(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CV 2: Consolidated groups: income of company in group
When this section applies
1: This section applies for the purposes of section FM 9 Income
2: The amount is treated as income of the company. Relationship with sections CB 15C to CB 15E
3: Subsection (2) is overridden by sections CB 15C CB 15D Kāinga Ora–Homes and Communities , and CB 15E amount company consolidated group income 2004 No 35 s HB 2(1)(e) Section CV 2(1) amended 27 February 2014 section 15(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CV 2(3) heading replaced 18 March 2019 section 135 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CV 2(3) heading amended 29 March 2025 section 20(1) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CV 2(3) replaced 18 March 2019 section 135 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CV 2(3) amended 29 March 2025 section 20(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CV 2(3) amended 23 March 2020 section 190 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CV 3: Consolidated groups: arrangement for disposal of shares
When this section applies
1: This section applies for the purposes of section FM 23 Income
2: The amount that would have been received in an arm’s length transaction is treated as income derived by the other company at the time of disposal. amount company consolidated group income 2004 No 35 s FD 10(8)
CV 4: Amalgamated companies: amount derived after amalgamation
When this section applies
1: This section applies for the purposes of section FO 7 Income
2: The amount is income of the amalgamated company in the income year in which it is derived if it would have been income of an amalgamating company but for the amalgamation. amalgamated company amalgamating company amount income income year 2004 No 35 s FE 4(b)
CV 5: Statutory producer boards
A levy received by a statutory producer board, other than a levy charged specifically for capital development, is income. income levy statutory producer board 2004 No 35 s OC 3(c)
CV 6: Crown Research Institutes
Income
1: An amount that a Crown Research Institute derives is income of the institute if the amount is provided to the institute for the purposes of—
a: any 1 or more of the activities listed in section 7
b: producing outputs relating to public good science and technology. Meaning
2: In this section, public good science and technology
a: that is likely to increase knowledge or understanding of the physical, biological, or social environment; or
b: that is likely to develop, maintain, or increase skills or scientific or technological expertise that is of particular importance to New Zealand; or
c: that may be of benefit to New Zealand, but is unlikely to be funded, or adequately funded, from non-governmental sources. amount Crown Research Institute income 2004 No 35 s CV 2 Section CV 6 substituted 1 February 2011 section 18 Research, Science, and Technology Act 2010
CV 7: 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 2004 No 35 s CV 3
CV 8: 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 for wine produced in New Zealand, the Governor-General may 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 for 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 in relation 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 Secondary legislation
4: An Order in Council under subsection (1)—
a: is secondary legislation ( see Part 3
b: commences in accordance with subsection (2), even if it is not yet published. Australian financial year Australian wine producer rebate Inland Revenue Acts New Zealand resident pay wine 2004 No 35 s CV 4 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section CV 8(4) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section CV 8(4) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
CV 9: Supplementary dividend holding companies
Section CV 9 repealed 26 June 2019 section 46 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
CV 10: Foreign dividend payment account companies or conduit tax relief companies
Section CV 10 repealed 6 October 2009 section 39(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CV 11: Maori authorities
Income
1: An amount that a member of a Maori authority derives as a distribution from the Maori authority is income of the member if the amount is—
a: a notional distribution under section HF 5
b: a taxable Maori authority distribution under section HF 7 When credits attached
2: The amount of a taxable Maori authority distribution or notional distribution is increased by a credit that is attached or is treated as attached under section RE 24 amount co-operative company Maori authority Maori authority credit member taxable Maori authority distribution 2004 No 35 ss HI 4(3) HI 5(2), (3) HI 7
CV 12: Trustees: amounts received after person’s death
To the extent to which section HC 8(2) amount income income year trustee 2004 No 35 s HH 8 Section CV 12 amended 31 March 2023 section 21(1) section 21(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CV 13: Amounts derived from trusts
An amount derived by a person is income of the person if it is—
a: beneficiary income to which sections HC 6 HC 17
b: a settlement on trust of property of the kind described in section HC 7(3)
c: a taxable distribution from a foreign trust to which section HC 18 amount beneficiary income foreign trust income settlement settlor taxable distribution trustee income 2004 No 35 ss HH 1(7) HH 3(1)
CV 14: Distributions from community trusts
To the extent to which section HC 21 amount community trust distribution income 2004 No 35 s HH 3(5A)
CV 15: Amounts derived from trusts while person absent from New Zealand
To the extent to which section HC 23 amount beneficiary income income resident in New Zealand taxable distribution 2004 No 35 s HH 3(3)
CV 16: Non-resident shippers
When this section applies
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. Amount of income
2: Five percent of the amount payable to the person for the carriage, whether payable inside or outside New Zealand, is treated as income of the person. Exemption
3: Despite subsection (2), the Commissioner may determine that some or all of an amount that would otherwise be income of a person under this section is a foreign-sourced amount. Place of shipping
4: 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. amount Commissioner exempt income foreign-sourced amount income income tax New Zealand non-resident pay resident in New Zealand 2004 No 35 ss FC 18 FC 19
CV 17: Non-exempt charities: taxation of tax-exempt accumulation
An amount of income of a person under section HR 12 charities: treatment day of final decision person income income year year Section CV 17 replaced 30 June 2014 section 22 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CV 17 amended 29 March 2018 section 31 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CV 18: Hedging of currency movements in Australian non-attributing shares and attributing FDR method interests
The amount of income that a person has under section EM 6 amount income Section CV 18 inserted 17 July 2013 section 12 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CV 19: Additional income for certain imputation credits
When this section applies
1: This section applies when a person has assessable income for the purposes of section LE 1 LE 1(4B) income Income
2: For the income year to which the LE 1(4B) income relates, the person derives an amount of income equal to the amount of the tax credit for the imputation credit under section LE 8B
a: the comparative value method; or
b: the deemed rate of return method. assessable income comparative value method deemed rate of return method FIF income FIF loss imputation credit income income year tax credit Section CV 19 inserted 1 April 2014 section 16 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CV 19(2) replaced 30 June 2014 section 23(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CV 19 list of defined terms comparative value method inserted 30 June 2014 section 23(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CV 19 list of defined terms deemed rate of return method inserted 30 June 2014 section 23(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CV 19 list of defined terms FIF income inserted 30 June 2014 section 23(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CV 19 list of defined terms FIF loss inserted 30 June 2014 section 23(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CV 20: Employee share schemes
An amount of income that a person has under section DV 27(9) amount employee share scheme income Section CV 20 inserted 29 September 2018 section 32 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CW: Exempt income
Contents
Income from business or trade-like activities
CW 1: Forestry companies established by the Crown, Maori owners, and holding companies
acquiring When this section applies
1: This section applies when a forestry company acquires Land disposed of
2: For the purposes of subsection (1),—
a: land disposed of disposed of
b: land disposed of disposed of Exempt income
3: The amount described in section CB 25(3) Relationship with section DP 9
4: Section DP 9 acquired amount exempt income forestry company holding company Maori incorporation Maori owners standing timber trustee 2004 No 35 s CW 1 Section CW 1 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 1(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 1(2) heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 1(2)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 1(2)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 1(4) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 24(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 9B
4: Section DP 9B amount exempt income income pay person right to take timber Section CW 1B inserted 29 August 2011 section 7 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 pay 2004 No 35 s CW 2
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 2004 No 35 s CW 3
CW 3B: Pre-1990 forest land units: emissions trading scheme
Section CW 3B repealed 6 October 2009 section 40 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CW 3C: Certain partitions or subdivisions of land
Exempt income when no more than minor economic disposal of land
1: An amount that a person who is a co-owner of land derives from disposing of land to another co-owner on a partition or subdivision is exempt income if the person’s end value proportion is no less than 95% of their acquisition proportion. Partially exempt income when more than minor economic disposal of land
2: If subsection (1) does not apply, an amount that a person who is a co-owner of land derives from disposing of land to another co-owner on a partition or subdivision is exempt income to the extent given by the following formula: amount derived − (total land value × (acquisition proportion − end value proportion)). Acquisition date for land provisions when no more than minor acquisition of land
3: For the purposes of the land provisions and sections CB 12 to CB 14 section CB 15(2) Acquisition date for land provisions when more than minor acquisition of land
4: For the purposes of the land provisions and sections CB 12 to CB 14
a: for the original land, being the proportion of land remaining after the calculation in paragraph (b), on the date they acquired their interest in the undivided land or the date they are treated by section CB 15(2)
b: for the additional land, being the proportion of the land calculated using the following formula, on the date the person became entitled to the additional land or, to the extent the additional land is acquired from an associated person, the date they are treated by section CB 15(2) (end value proportion − acquisition proportion) ÷ end value proportion. Bright-line start date when no more than minor acquisition of land
5: If the person’s end value proportion is no more than 105% of their acquisition proportion, their bright-line start date for the land they receive on the partition or subdivision is their bright-line start date for the undivided land. Bright-line start date when more than minor acquisition of land
6: If the person’s end value proportion is more than 105% of their acquisition proportion, their bright-line start date for the land they receive on the partition or subdivision is as follows:
a: for the original land
b: for the additional land (end value proportion − acquisition proportion) ÷ end value proportion. Transitional rule for change in terminology
6B: For the purposes of subsections (5) and (6), if the undivided land was acquired before 1 July 2024, the bright-line acquisition date for the land is treated as the bright-line start date. Meaning of end value proportion
7: End value proportion Meaning of acquisition proportion
8: Acquisition proportion Meaning of co-owner
9: Co-owner Definition of items in formulas
10: In the formulas in subsections (2), (4), and (6),—
a: amount derived
b: total land value
c: acquisition proportion
d: end value proportion Example
Everly acquires land on 1 October 2024. Her friend Daniel comes on as a co-owner (50:50 shares) of the land on 5 February 2025. Everly and Daniel subdivide the land and construct a house each. The subdivision is complete and new titles are issued on 15 June 2026. Daniel’s title ends up being 60% of the value of both titles. As Everly and Daniel go from owning a half share in the undivided land to being the sole owner of their parcel of land, they are disposing of their share in the parcel of land they did not keep to the other. Everly has disposed of some of her share in the land by more than a minor amount (more than the 5% safe-harbour) so only some of her income will be exempt, and she must calculate this under section CW 3C(2) acquisition proportion amount bright-line acquisition date bright-line start date co-owner company dispose end value proportion exempt income land land provisions look-through company partner partnership shareholder trustee Section CW 3C replaced 29 March 2025 section 21(1) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 3C(5) heading replaced 29 March 2025 section 21(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 3C(5) replaced 29 March 2025 section 21(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 3C(6) heading replaced 29 March 2025 section 21(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 3C(6) replaced 29 March 2025 section 21(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 3C(6B) heading inserted 29 March 2025 section 21(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 3C(6B) inserted 29 March 2025 section 21(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 3C list of defined terms bright-line start date inserted 29 March 2025 section 21(3) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 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 40 excluded income exempt income life insurance policy life insurer New Zealand offered or entered into in New Zealand pay resident in New Zealand superannuation fund 2004 No 35 s CW 4
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 2004 No 35 s CW 5
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 subpart HC section HZ 2
f: an unincorporated body. Relationship with sections LZ 6 to LZ 8
3: A person who derives interest that is exempt income under this section is not entitled to a tax credit for the interest under sections LZ 6 to LZ 8 absentee Commissioner company exempt income income tax interest Maori authority mortgage notice public authority trustee 2004 No 35 s CW 6
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 2004 No 35 s CW 7
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 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 2004 No 35 s CW 8
CW 8B: Certain amounts derived from use of assets
When this section applies
1: This section applies when a person derives income from the use of an asset described in section DG 3 When person opts out of assets expenditure rules
2: Income that the person derives from the use of the asset is exempt income if—
a: they meet the requirements of section DG 21
b: they choose under that section to treat the income as exempt income. Below-market use and use by associates
3: An amount of income that the person derives in relation to the private use of an asset as described in section DG 4(1) amount asset exempt income income Section CW 8B inserted 17 July 2013 section 13(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Income from equity
CW 9: Dividend derived from foreign company
Exempt income
1: A dividend from a foreign company is exempt income if derived by a company that is resident in New Zealand. Exclusions
2: Subsection (1) does not apply to a dividend if the dividend is paid in relation to rights that are—
a: a direct income interest that meets the requirements of neither section EX 34 section EX 35
i: section EX 31
ii: section EX 32
iii: section EX 36
iv: section EX 37
v: section EX 37B
vi:
b: a fixed-rate foreign equity:
c: rights to a deductible foreign equity distribution. Non-application to certain dividends
3: This section does not apply to a dividend—
a: derived by a portfolio investment entity:
b: excluded by section CD 36(2) company dividend deductible foreign equity distribution exempt income fixed-rate foreign equity portfolio investment entity resident in New Zealand Section CW 9 substituted 6 October 2009 section 41(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 9(2)(a) amended 7 May 2012 section 9(1) Taxation (International Investment and Remedial Matters) Act 2012 Section CW 9(2)(a)(vi) repealed 18 March 2019 section 136 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 9(3) heading replaced 7 May 2012 section 9(2) Taxation (International Investment and Remedial Matters) Act 2012 Section CW 9(3) replaced 7 May 2012 section 9(2) Taxation (International Investment and Remedial Matters) Act 2012 Section CW 9 list of defined terms multi-rate PIE repealed 7 May 2012 section 9(3)(a) Taxation (International Investment and Remedial Matters) Act 2012 Section CW 9 list of defined terms portfolio investment entity inserted 7 May 2012 section 9(3)(b) Taxation (International Investment and Remedial Matters) Act 2012 Section CW 9 list of defined terms portfolio tax rate entity repealed 7 May 2012 section 9(3)(a) Taxation (International Investment and Remedial Matters) Act 2012
CW 10: Dividend within New Zealand wholly-owned group
Exempt income: dividends within wholly-owned groups
1: A dividend is exempt income if—
a: it is derived by a company (the recipient
i: not a foreign company; or
ii: a New Zealand resident company that is treated under a double tax agreement as not being resident in New Zealand; and
b: it is derived from a company (the 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 of subsections (5) and (6) met; and
f: for a dividend derived by a company described in paragraph (a)(ii), 1 or more of the following apply:
i: the recipient is treated as not being resident in New Zealand under a double tax agreement between New Zealand and Australia:
ii: immediately after the dividend is derived by the recipient, the recipient has only shareholders that would have full relief from New Zealand tax under a double tax agreement on a dividend paid to them at that time by the recipient if the recipient were treated as being a company that is not a foreign company:
iii: the total amount of dividends derived by the recipient from the payer is less than $1 million in each 12-month period that includes the date on which the dividend is derived by the recipient:
iv: the recipient becomes a company that is not a foreign company within 2 years of the date on which it derived the dividend and does not itself pay a dividend in the period that starts on the date on which it derived the dividend and ends on the date on which it becomes a company that is not a foreign company. Exempt income: fully imputed dividends within wholly-owned groups
1B: A dividend is exempt income to the extent to which it is fully imputed if—
a: it is derived by a company described in subsection (1)(a)(ii); and
b: the requirements of subsection (1)(b) to (e) are met; and
c: the requirement of subsection (1)(f) is not met. Aligned balance dates
2: Exclusion: dividends from council-controlled organisations
3: Exclusion: debt release dividends
4: 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 other provisions
7: This section overrides section HC 38 amount company council-controlled organisation dividend double tax agreement exempt income foreign company friendly society fully imputed local authority New Zealand New Zealand resident New Zealand tax resident in New Zealand shareholder sickness, accident, or death benefit fund trustee wholly-owned group of companies 2004 No 35 s CW 10 Section CW 10(1) heading replaced 31 March 2023 section 23(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10(1)(a) replaced 31 March 2023 section 23(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10(1)(e) amended 31 March 2023 section 23(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10(1)(e) amended 1 April 2022 section 55(1) section 55(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CW 10(1)(f) inserted 31 March 2023 section 23(4) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10(1B) heading inserted 31 March 2023 section 23(5) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10(1B) inserted 31 March 2023 section 23(5) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10(2) heading repealed 29 August 2011 section 8(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CW 10(2) repealed 29 August 2011 section 8(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CW 10(3) heading repealed 1 April 2022 section 55(2) section 55(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CW 10(3) repealed 1 April 2022 section 55(2) section 55(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CW 10(4) heading repealed 30 March 2017 section 31 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CW 10(4) repealed 30 March 2017 section 31 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CW 10(7) heading inserted 1 April 2024 section 19(1) section 19(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CW 10(7) inserted 1 April 2024 section 19(1) section 19(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CW 10 list of defined terms amount inserted 31 March 2023 section 23(6) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10 list of defined terms deduction repealed 29 March 2018 section 33 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 10 list of defined terms double tax agreement inserted 31 March 2023 section 23(6) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10 list of defined terms fully imputed inserted 31 March 2023 section 23(6) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10 list of defined terms income year repealed 29 March 2018 section 33 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 10 list of defined terms net income repealed 29 March 2018 section 33 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 10 list of defined terms New Zealand resident inserted 31 March 2023 section 23(6) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10 list of defined terms New Zealand tax inserted 31 March 2023 section 23(6) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10 list of defined terms shareholder inserted 31 March 2023 section 23(6) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CW 10 list of defined terms tax avoidance arrangement repealed 29 March 2018 section 33 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CW 10B: Dividends derived by council-controlled organisation holding companies
A dividend derived by a council-controlled organisation (the recipient payer
a: the payer is—
i: a council-controlled organisation; or
ii: a port company, a subsidiary of a port company, or an energy company that would be a council-controlled organisation in the absence of section 6(4)
b: at the time the dividend is derived, 100% of the voting interests in the payer are held by—
i: 2 or more local authorities; or
ii: a combination of 1 or more Ministers of the Crown, on behalf of the Crown, and 1 or more local authorities; and
c: at the time the dividend is derived, a local authority holds 100% of the voting interests in the recipient. council-controlled organisation dividend exempt income local authority voting interest Section CW 10B inserted 1 April 2022 section 56(1) section 56(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
CW 11: Dividend of conduit tax relief holding company
Section CW 11 repealed 7 May 2012 section 10(1) Taxation (International Investment and Remedial Matters) Act 2012
CW 12: Proceeds of share disposal by qualifying foreign equity investor
Exempt income: proceeds from disposal of share in resident company
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 (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 meets the requirements of either or both of subsections (2) and (3). Requirements relating to main activity of resident company
2: A resident company meets the requirements of 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 meets the requirements of 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 (the members
c: under the laws of the territory or 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, an interest of 10% or more in the capital of the legal entity; and
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, has an interest of 10% or more in the capital of the legal entity and who would—
i: be entitled to receive an amount derived from a disposal to which this section would apply; and
ii: 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: in any circumstances under the laws of the territory in which the member is resident or under the laws of part of the territory be entitled to receive from the government of the territory or part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness, or other compensation for the reduction referred to in 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 resident in New Zealand:
ii: when treated as holding the interests of a person associated with the resident, holds a total direct or indirect interest of 10% or more 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 (the partners
c: under the laws of the territory or 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 (the general partner
e: has at least 1 partner (the 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, an interest of 10% or more in the capital of the unincorporated body; and
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, has an interest of 10% or more in the capital of the unincorporated body and 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 of the territory in which the partner is resident or under the laws of part of the territory be entitled to receive from the government of the territory or part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness, or other compensation for a payment of the tax referred to in subparagraph (i); and
i: does not have a holder of a direct or indirect interest in the capital of the unincorporated body who,—
i: is resident in New Zealand:
ii: when treated as holding the interests of a person associated with the resident, holds a total direct or indirect interest of 10% or more 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 a legal entity that meets the requirements of paragraphs (a) to (c) of the definition of foreign exempt entity
c: is not part of an unincorporated body that meets the requirements of paragraphs (a) to (c) of the definition of foreign exempt partnership
d: under the laws of the territory or 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 of the territory in which the person is resident or under the laws of part of the territory be entitled to receive from the government of the territory or part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness, or other compensation for a payment of the tax referred to in subparagraph (i); and
f: does not have a holder of a direct or indirect interest in the capital of the legal entity who,—
i: is resident in New Zealand:
ii: when treated as holding the interests of a person associated with the resident, holds a total direct or indirect interest of 10% or more 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 that is in force between New Zealand and the territory, if there is an agreement and it provides for the residency of the person; or
b: otherwise, under the laws of the territory. Approval and withdrawal of approval for territory
6: The Governor-General may 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. Secondary legislation
7: An Order in Council under subsection (6) is secondary legislation ( see Part 3 amount associated business company dividend double tax agreement exempt income foreign exempt entity foreign exempt partnership foreign exempt person income insurance interest land pay personal property lease payment qualifying foreign equity investor recognised exchange resident in New Zealand royalty share tax 2004 No 35 s CW 11B The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section CW 12(4) substituted 6 October 2009 section 42 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 12(4) qualifying foreign equity investor inserted 27 February 2014 section 17 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CW 12(5)(a) substituted 1 April 2008 section 328(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 12(5)(b) substituted 1 April 2008 section 328(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 12(7) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section CW 12(7) inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section CW 12 list of defined terms 1990 version provisions repealed 1 April 2010 section 594 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CW 13: 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 met. 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 meets the requirements of 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 (the 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 pay resident in New Zealand share venture investment agreement Venture Investment Fund 2004 No 35 s CW 11C
CW 14: 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
c: the company paid a dividend that section CW 15 Dividend not exempt income
2: The derived dividend is not exempt income under section CW 10 section CW 9 company dividend exempt income qualifying company Section CW 14 replaced 30 March 2017 section 32(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CW 14(1)(b) amended 30 March 2017 section 33(1)(a) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CW 14(2) amended 30 March 2017 section 33(1)(b) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CW 15: Dividends paid by qualifying companies
Exempt income of shareholder
1: To the extent to which the amount of a dividend that a qualifying company pays to a person resident in New Zealand is more than a fully imputed distribution, the amount is exempt income of the person. Exempt income of beneficiary
2: If a dividend paid by a qualifying company to a trustee shareholder is, or becomes, beneficiary income of a beneficiary resident in New Zealand, the dividend is exempt income of the beneficiary. beneficiary income dividend exempt income fully imputed pay qualifying company resident in New Zealand shareholder trustee 2004 No 35 s HG 13(1)(a), (1A) Section CW 15(1) substituted 6 October 2009 section 43(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 15 list of defined terms bonus issue repealed 2 November 2012 section 15 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CW 15 list of defined terms fully imputed inserted 6 October 2009 section 43(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Employee or contractor income
CW 16: Allowance of Governor-General and other benefits and privileges
The following are exempt income:
a: the allowance of the Governor-General, paid under section 6 Governor-General Act 2010
b: any benefit or privilege provided under an agreement made under section 11(1) Governor-General Act 2010 section 28(1)(d) exempt income Section CW 16 substituted 23 November 2010 section 23 Governor-General Act 2010 Section CW 16 list of defined terms exempt income inserted 17 July 2013 section 14 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CW 16B: Accommodation expenditure: out-of-town secondments and projects
When this section applies
1: This section applies when—
a: the employment duties of an employee require them to work at a distant workplace on an out-of town secondment or a project of limited duration; and
b: the period of the employee's employment or service at the distant workplace is a period of continuous work; and
c: the employer—
i: provides accommodation for the employee for a period that falls within a time limit described in section CW 16C:
ii: incurs expenditure on the employee's accommodation at the distant workplace for a period that falls within a time limit described in section CW 16C
iii: incurs expenditure on the employee's accommodation for necessary travel to and from the distant workplace in connection with the performance of their duties. Exclusions
2: This section does not apply—
a: to an amount that is the value provided or expenditure incurred by the employer when, under the terms of the their employment, the employee would be entitled to a greater amount of employment income, should the employee choose, or have chosen, not to receive the benefit of the amount:
b: in relation to an out-of-town secondment, to a new employee of the employer. Exempt income
3: The amount that is the value provided or expenditure incurred by the employer is exempt income of the employee. Estimated expenditure
4: For the purposes of subsection (1)(c)(ii),—
a: an employer may make, for a relevant period, a reasonable estimate of the amount of expenditure likely to be incurred on an employee's accommodation; and
b: the amount estimated is treated as if it were the amount incurred during the period to which the estimate relates. Definitions for this section
5: In this section and sections CW 16C to CW 16F CW 17CB CZ 29 to CZ 30 FP 22 distant workplace
a: is another workplace of the employee; and
b: is not within reasonable daily travelling distance of their residence out-of-town secondment
a: because the employment duties of the employee require them to work at the distant workplace for the performance of those duties; and
b: for a period that, in their employer's expectation at the start of the period of secondment, will last for no more than 2 years period of continuous work
a: means a period when an employee has ongoing duties of employment that must be performed to a significant extent at a distant workplace, requiring the employee to stay at the distant location for 1 or more nights; and
b: includes the employee's time away on leave or other breaks for personal reasons, weekend breaks, required rest periods, and other similar periods project of limited duration
a: whose principal purpose is to create, build, develop, restore, replace, or demolish a capital asset; and
b: which is carried out under a contract between an employer (the contractor
c: in relation to which the engagement of an employee of the contractor at the distant workplace—
i: has, at the outset, clear start and end dates; and
ii: involves work that, apart from incidental activities, is undertaken solely for the purposes of the project; and
iii: in the contractor’s expectation at the start of the project, will last for a period of no more than 3 years workplace
a: at which an employee performs their employment duties; or
b: from which an employee's duties are allocated. accommodation amount associated person company distant workplace employee employer employment employment income exempt income group of companies out-of-town secondment pay period of continuous work project of limited duration workplace Section CW 16B inserted 1 April 2015 section 24(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 16B(5) amended 1 April 2025 section 22 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 16B(5) project of limited duration replaced 24 February 2016 section 83 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 16B(5) project of limited duration replaced 24 February 2016 section 83 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CW 16C: Time periods for certain accommodation expenditure
Time limits: out-of-town secondments
1: Section CW 16B
a: the date that is 2 years from the date on which they began work at the distant workplace:
b: the date on which the out-of-town secondment ends:
c: the date on which the employee receives a relocation payment under section CW 17B
d: the date on which the employer's expectation regarding the length of the period changes, and the total period is expected to be more than 2 years. Time limits: projects of limited duration
2: Section CW 16B
a: the date that is 3 years from the date on which the employee began work on the project at the distant workplace:
b: the date on which the employee's participation in the project at the distant workplace ends:
c: the date on which the employee receives a relocation payment under section CW 17B
d: the date on which the employer's expectation regarding the employee's involvement in the project changes, and the total period of their involvement in the project is expected to be more than 3 years. When subsection (4) applies: time limits when expectations change
3: Subsection (4) applies for a placement of an employee at a distant workplace when—
a: the employment duties of the employee require them to work for a period of time at the distant workplace for the performance of those duties; and
b: the terms of the placement of the employee meet the requirements of an out-of-town secondment or project of limited duration, as applicable, other than the requirement related to the limitation on the length of the period for which the employee is to remain at the distant workplace; and
c: the expectation of their employer at the start of the period is that the duration of the secondment or project will exceed the applicable time limit; and
d: during the period, the employer revises their expectation of the period for the secondment or project, reducing its expected duration, and as a consequence, the requirements of an out-of-town secondment or project of limited duration, as applicable, are fully met. Period of exemption
4: Section CW 16B Time limits in exceptional circumstances
5: A time limit does not apply if exceptional circumstances arise beyond the control of the employer and employee that require the employee to remain at the distant workplace after the period expires. Examples are a natural disaster or medical emergency. However, an extension of time must be limited to the period for which the employee is unable, because of the exceptional circumstances, to leave the distant workplace. Avoidance provision
6: For the purposes of determining whether a time limit under this section applies, a break in a period of continuous work at a distant workplace is ignored if a reason, that is more than incidental, for the cessation of the employment or service is to allow a further period of exemption under section CW 16B CZ 29 CZ 29B FP 22 accommodation amount distant workplace employee employer employment out-of-town secondment pay period of continuous work project of limited duration workplace Section CW 16C inserted 1 April 2015 section 24(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 16C(6) amended 1 April 2025 section 23 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CW 16D: Accommodation expenditure: conferences and overnight stays
When this section applies
1: This section applies when—
a: the employment duties of an employee require them to attend a work-related meeting, conference, or training course that entails an overnight stay; and
b: the period for which the employee's attendance is required is a period of continuous work; and
c: their employer—
i: provides accommodation for the employee for the period of their attendance:
ii: incurs expenditure on the employee's accommodation for the period of their attendance:
iii: incurs expenditure on the employee's accommodation for necessary travel in connection with the performance of their duties for the period of their attendance. Exclusions
2: This section does not apply to an amount that is the value provided or expenditure incurred by the employer when, under the terms of their employment, the employee would be entitled to a greater amount of employment income, should the employee choose, or have chosen, not to receive the benefit of the amount. Exempt income
3: The amount that is the value provided or expenditure incurred by the employer is exempt income of the employee. Extended meaning of period of continuous work
4: For the purposes of this section, a period of continuous work accommodation amount employee employer employment employment income exempt income period of continuous work Section CW 16D inserted 1 April 2015 section 24(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CW 16E: Accommodation expenditure: new employees
Despite section CW 16B(2)(b)
a: when the employer intends, at the time of employing the new employee, that the new employee would work permanently at a workplace of the employer that is not a distant workplace, but instead requires the employee to work temporarily at another of their workplaces that is a distant workplace:
b: the new employee is on an out-of-town secondment to work—
i: for a person with whom the employer has a continuing commercial affiliation or working relationship, and for the purposes of section CW 16B
ii: for a period that is expected to be no more than 2 years; and
iii: at a distant workplace that is the person's workplace. distant workplace employee employer out-of-town secondment workplace Section CW 16E inserted 1 April 2015 section 24(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CW 16F: Accommodation expenditure: multiple workplaces
When this section applies
1: This section applies when—
a: the employment duties of an employee require them to work on an ongoing basis at more than 1 workplace; and
b: 1 or more of those workplaces is a distant workplace; and
c: in connection with the employee's employment or service, their employer provides accommodation or pays an amount for the employee's accommodation at the distant workplace. Exclusions
2: This section does not apply—
a: to an amount that is the value provided or the payment by the employer when, under the terms of their employment, the employee would be entitled to a greater amount of employment income, should the employee choose, or have chosen, not to receive the benefit of the amount:
b: when the employee has 2 workplaces and 1 of those workplaces is a home office. Exempt income
3: The amount that is the value provided or the payment by the employer is exempt income of the employee. accommodation amount distant workplace employee employer employment employment income exempt income pay workplace Section CW 16F inserted 1 April 2015 section 24(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CW 17: 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. Requirements for expenditure connected to employment or service
2B: For the purposes of subsections (1) and (2), expenditure is treated as incurred, or an amount paid, in connection with an employee's employment or service only if—
a: the expenditure is incurred or the amount is paid because the employee is performing an obligation required by their employment or service; and
b: the employee derives employment income through the performance of the obligation; and
c: the expenditure is necessary in the performance of the obligation. When subsection (2D) applies
2C: Subsection (2D) applies for the purposes of subsections (2) and (3) to an amount that an employer pays to or on behalf of an employee in connection with their employment or service when—
a: the payment—
i: is made to, or on behalf of, a wide group or class of employees; and
ii: is provided mainly to reimburse an expense incurred by an employee in deriving their employment income; and
b: the amount paid is not an amount incurred by the employer when, under the terms of their employment, the employee would be entitled to a greater amount of employment income, should the employee choose, or have chosen, not to receive the benefit of the amount; and
c: the Commissioner considers that the average private or capital benefit that the employee as a member of the group or class is likely to receive from the payment is hard to measure. Determinations
2D: The Commissioner may make a determination under section 91AAT 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. Depreciation loss included
4: In this section, expenditure includes an amount of depreciation loss. Relationship with certain employment expenses provisions
5: This section does not apply to an amount referred to in section CW 16B to CW 16F CW 17B CW 17C CW 17CB CW 17CC CW 17D CW 18 amount Commissioner deduction depreciation loss employee employer employment employment income employment limitation exempt income expenditure on account of an employee pay tax 2004 No 35 s CW 13 Section CW 17(1) amended 2 November 2012 section 16(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CW 17(2B) heading inserted 1 April 2015 section 25(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17(2B) inserted 1 April 2015 section 25(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17(2C) heading inserted 1 April 2015 section 25(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17(2C) inserted 1 April 2015 section 25(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17(2D) heading inserted 1 April 2015 section 25(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17(2D) inserted 1 April 2015 section 25(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17(4) heading added 6 October 2009 section 44(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 17(4) added 6 October 2009 section 44(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 17(5) heading replaced 1 April 2015 section 25(2)(a) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17(5) added 6 October 2009 section 44(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 17(5) amended 1 April 2025 section 24 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 17(5) amended 1 April 2015 section 25(2)(b) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17 list of defined terms Commissioner inserted 1 April 2015 section 25(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17 list of defined terms depreciation loss inserted 6 October 2009 section 44(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 17 list of defined terms employment inserted 1 April 2015 section 25(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17 list of defined terms employment income inserted 1 April 2015 section 25(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17 list of defined terms tax inserted 1 April 2015 section 25(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CW 17B: 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: 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 person's workplace to be beyond reasonable travelling distance of their 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 17B inserted 6 October 2009 section 45 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CW 17C: 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 17C inserted 6 October 2009 section 45 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CW 17CB: Payments for certain work-related meals
Exempt income
1: When the employment duties of an employee require them to work away from their employer's workplace, expenditure that the employer incurs for or on behalf of the employee for a meal for the employee is exempt income of the employee. For these purposes, expenditure includes a reimbursement payment or a meal allowance. Inclusions: work-related events
2: For the purposes of subsection (1), a meal includes—
a: food and drink that the employee consumes as part of a working meal arranged as part of or as an alternative to a formal meeting for business discussions:
b: food and drink that the employee consumes at a conference or training course:
c: light refreshments in the form of snack foods such as biscuits and fruit, or liquid refreshments such as tea, coffee, water, or similar refreshments, provided for the employee, but only if—
i: their employment duties require them to be away from their employment base for most of the day; and
ii: the employer would normally provide the refreshments to the employee on the day; and
iii: it is not practicable for the employer to provide the refreshments on the day. Inclusions: meals when travelling on business
3: For the purposes of subsection (1), a meal also includes food and drink that the employee consumes when their employment duties require them to travel in the performance of those duties. Exclusion: salary sacrifice
4: Subsection (1) does not apply if expenditure is incurred by the employer when, under the terms of their employment, the employee would be entitled to a greater amount of employment income, should the employee choose, or have chosen, not to receive the benefit of the expenditure. Time limit
5: The maximum period applying to expenditure incurred under subsection (1) other than expenditure on a meal described in subsection (2), is 3 months—
a: commencing—
i: on the date on which the employee starts to work away from their employer's workplace; or
ii: for an employee who does not have a fixed workplace, on the date on which they arrive at their accommodation base:
b: ending on the earlier of—
i: the date on which the 3-month period expires; or
ii: the date on which the employee returns to their employer's workplace to undertake their employment duties for their employer, or the date on which the employee moves to a new accommodation base, as applicable. Measuring period
6: In the measurement of the maximum period in subsection (5), the period includes the employee's time away on leave or other breaks for personal reasons, weekend breaks, required rest periods, and other similar periods. Time limits in exceptional circumstances
7: The time limit referred to in subsection (5) does not apply if exceptional circumstances arise beyond the control of the employer and employee that require the employee to continue to work away from their employer's workplace after the period expires. However, an extension of time must be limited to the period for which the employee is unable, because of the exceptional circumstances, to return to their employer's workplace. Meaning of employer’s workplace
7B: In this section, employer’s workplace Relationship with FBT rules
8: To the extent to which the expenditure of an employer described in subsection (1) gives rise to a fringe benefit, the fringe benefit tax rules override this section. accommodation amount business employee employer employer’s workplace employment employment income exempt income fringe benefit fringe benefit tax rules pay workplace Section CW 17CB inserted 1 April 2015 section 26 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 17CB(7B) heading inserted 29 March 2018 section 34(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 17CB(7B) inserted 29 March 2018 section 34(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 17CB list of defined terms employer’s workplace inserted 29 March 2018 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CW 17CC: Payments for distinctive work clothing
Exempt income
1: An amount that an employer pays to or on behalf of an employee for distinctive work clothing for the employee is exempt income of the employee. Distinctive work clothing
2: For the purposes of this section, distinctive work clothing section CX 30 Certain plain clothes included
3: Despite subsection (2), for the purposes of subsection (4), the wearing of distinctive work clothing by an employee includes the wearing of plain clothes that would normally be worn for private purposes if—
a: their employer provides a uniform to employees; and
b: despite the provision of a uniform, the employer requires the employee to wear plain clothes in the performance of their employment duties; and
c: as at 1 July 2013, the employer's general terms and conditions of employment or service provided for allowances for plain clothes to be paid to employees; and
d: historically, the plain clothes allowance was part of a larger amount paid at the time by the employer to employees in relation to the provision of plain clothes, the balance being a taxable amount that was at a later period classified as remuneration for employees then receiving the plain clothes allowance under the employer's general terms and conditions; and
e: the terms and conditions referred to in paragraph (c) continue to provide for the payment of the plain clothes allowance. Exempt amount
4: The amount that the employer pays to or on behalf of the employee as an allowance for the plain clothes is exempt income of the employee. amount distinctive work clothing employee employer employment exempt income pay Section CW 17CC inserted 30 June 2014 section 27 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CW 17D: Payments related to health or safety
When this section applies
1: This section applies when an employer pays an amount to, or on behalf of, an employee that is related to the employee’s health or safety and is aimed at managing the risks to health and safety in the workplace as provided for under the Health and Safety at Work Act 2015 Exempt income
2: The amount paid by the employer is exempt income of the employee to the extent to which the payment is for a benefit that would be excluded by section CX 24 amount employee employer exempt income fringe benefit pay Section CW 17D inserted 1 April 2025 section 25(1) section 25(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CW 18: 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 pay 2004 No 35 s CW 14
CW 19: Amounts derived during short-term visits
Exempt income
1: Income that a non-resident person derives
a: the visit is for 92 or fewer days, counting the days of arrival and departure as a whole day each; and
b: the person is present in New Zealand for 92 days or fewer in total in each 12-month period that includes the period of the visit; 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 2004 No 35 s CW 15 Section CW 19(1) amended 18 March 2019 section 137 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 19(1)(b) replaced 30 March 2017 section 34(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CW 19B: Certain amounts derived by employees during emergency events: exempt income
Income that satisfies section FP 20
a: accommodation:
b: less than or equal to $5,000 in total, if the income is in a form other than accommodation. accommodation exempt income income Section CW 19B inserted 1 April 2025 section 26 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CW 20: 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 YD
a: a solo or group performance by actors, comperes, 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 2004 No 35 s CW 16
CW 21: 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 136
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 YD 1(3)
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 2009 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 2004 No 35 s CW 17 Section CW 21(1)(b) amended 1 October 2018 section 443(3) Customs and Excise Act 2018 Section CW 21(2) non-resident crew member amended 29 November 2010 section 406(1) Immigration Act 2009
CW 22: 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 YD 1(3) 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 pay resident in New Zealand 2004 No 35 s CW 18
CW 23: Income for military or police service in operational area
When this section applies
1: This section applies when a member of the New Zealand Defence Force or the police (the member Exempt income
2: The following are exempt income of the member:
a: an operational allowance:
b: an amount that the ministerial committee decides under subsection (3) is exempt income. 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 that an amount of income derived by a member for being in an operational area is exempt income. Some definitions
4: In this section,— operational allowance
a: is paid directly and solely to the member 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 2004 No 35 s CW 19
CW 24: 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 pay 2004 No 35 s CW 20
CW 25: 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 pay 2004 No 35 s CW 21
CW 26: Jurors’ and witnesses’ fees
Fees paid by the Crown to jurors and to witnesses, other than expert witnesses, are exempt income. exempt income pay 2004 No 35 s CW 22
CW 26B: Exempt ESS
An amount derived from an exempt ESS is exempt income. amount exempt ESS exempt income Section CW 26B inserted 29 March 2018 section 35 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CW 26C: Meaning of exempt ESS
Exempt ESS
1: Exempt ESS
a: a scheme that had the Commissioner’s approval under section DC 12 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
b: an arrangement of which the Commissioner has been notified under section 63B(1)
i: the arrangement meets the criteria in subsections (2) to (9) of this section; and
ii: the Commissioner has received all forms due under section 63B(2) and (3) Purchase of shares
2: The arrangement must provide that—
a: the shares are available for no more than their market value at the date of purchase or subscription; and
b: the market value of the shares purchased or subscribed for by an employee, or a trustee for an employee, under the arrangement is less than or equal to $7,500
c: the difference between the market value of the shares purchased or subscribed for by an employee or a trustee and the amount that an employee spends on buying shares under the arrangement is less than or equal to $3,000 Eligibility
3: The arrangement must provide that—
a: a full-time permanent employee to whom an offer under the arrangement is made is eligible to participate in the arrangement, on an equal basis with 90% or more of other full-time permanent employees to whom an offer under the arrangement is not subject to foreign security disclosure rules; and
b: if it applies to part-time employees, those employees to whom an offer under the arrangement is made are eligible to participate in the arrangement, on an equal basis with 90% or more of other part-time employees to whom an offer under the arrangement is not subject to foreign security disclosure rules; and
c: if it applies to seasonal workers, those employees to whom an offer under the arrangement is made are eligible to participate in the arrangement, on an equal basis with 90% or more of other seasonal workers to whom an offer under the arrangement is not subject to foreign security disclosure rules; and
d: if it requires that an employee spend a minimum amount on buying shares, it requires no more than $1,000 to be spent in a year; and
e: if it requires that an employee must have a minimum period of employment or service before the employee is eligible to participate, it requires—
i: no more than 3 years full-time work, for full-time employees; and
ii: no more than an accumulated period that is the equivalent of 3 years full-time work, for other employees. Trusts
3B: If a trust holds the shares in trust for the employee, the arrangement must provide that—
a: the trustee pays dividends directly to the employee; and
b: the dividends are treated as being derived by the employee. Payments
4: The arrangement must provide that—
a: if it requires that an employee must buy the shares for more than nominal consideration,—
i: a loan for the cost of the shares is available to the employee; or
ii: the employee may pay for or buy the shares in regular instalments of a month or less, and any regular instalments are subject to paragraph (d)(ii); and
b: any loan to an employee to buy shares is free of interest and other charges; and
c: any loan or regular instalments have a maximum term of 60 months and a minimum term of 36 months; and
d: any loan to an employee to buy shares is repayable by regular instalments of a month or less, but—
i: the loan is repayable early in full or in part at the employee’s discretion; and
ii: in the case of an employee who is on unpaid or parental leave for more than a month, the regular instalments are suspended while on leave and the term of the loan is extended as appropriate. Serious hardship
5: The arrangement must provide, in the case of serious hardship that results or may result from an employee’s continued participation in the exempt ESS, that, with the employee’s agreement,—
a: any regular instalments and any other terms related to payment by the employee may be varied; or
b: the employee may withdraw from the arrangement, and any shares are bought from the employee for their market value on the day of withdrawal, subject to the repayment of any outstanding loan. Withdrawal
6: The arrangement must provide that the employee may withdraw from the arrangement on giving 1 month’s notice to the relevant party. Any shares must be bought from the employee for the lesser of their market value on the day of withdrawal and their cost to the employee, subject to the repayment of any outstanding loan. Period of restriction
7: The arrangement must provide that,—
a: if the employee has not acquired the shares for market value, there is a period of restriction during which the shares must not be disposed of other than as part of a takeover or similar share reorganisation,
i: a period of 3 years starting on the date the employee acquired the shares, or the period of repayment of a loan made to them under the scheme for this purpose, whichever is longer; and
ii: a period starting on the date the employee
b: if the employee has acquired the shares for market value, there is a period of restriction during which the shares must not be disposed of other than as part of a takeover or similar share reorganisation,
i: the shortest period in paragraph (a)(i) and (ii); and
ii: any period of restriction provided by the arrangement, if that period finishes on or after the date on which the employee has no further repayment obligations for a loan made to them under the scheme. End of period of restriction: first option
8: The arrangement may provide, when the period of restriction provided by subsection (7) ends, that the shares are transferred to the employee if they have not already been transferred or, if the employee chooses, that the shares are acquired from the employee or trustee for the lesser of—
a: the cost of the shares to the employee:
b: the market value of the shares on the date the period of restriction ends. End of period of restriction: second option
8B: If the arrangement does not provide as described in subsection (8)
a: in the case that the employee is currently employed, that the shares are transferred to the employee if they have not already been transferred or, if the employee chooses, that the shares are acquired from the employee or trustee for the lesser of—
i: the cost of the shares to the employee:
ii: the market value of the shares on the date the period of restriction ends:
b: in the case that the employee is not currently employed, that the shares are acquired from the employee or trustee for the lesser of—
i: the cost of the shares to the employee:
ii: the market value of the shares on the date the period of restriction ends. End of period of restriction: certain cases
9: Despite subsections (8) and (8B)
a: the shares are transferred to the former employee if they have not already been transferred, or transferred to the legal representative of the employee’s estate, as appropriate; or
b: if the employee chooses, the shares are purchased for the lesser of—
i: the cost of the shares to the employee:
ii: the market value of the shares on the date the period of restriction ends. amount arrangement Commissioner company employee employer employment exempt ESS group of companies interest loan market value normal retiring age notice pay share trustee year Section CW 26C inserted 29 March 2018 section 35 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 26C(2)(b) amended 1 April 2025 section 27(1)(a) section 27(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 26C(2)(c) amended 1 April 2025 section 27(1)(b) section 27(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 26C(3B) heading inserted 23 March 2020 section 95(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 26C(3B) inserted 23 March 2020 section 95(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 26C(7)(a) amended 23 March 2020 section 95(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 26C(7)(a)(ii) amended 30 March 2021 section 19 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CW 26C(7)(b) amended 23 March 2020 section 95(3) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 26C(8) heading replaced 23 March 2020 section 95(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 26C(8) replaced 23 March 2020 section 95(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 26C(8B) heading inserted 23 March 2020 section 95(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 26C(8B) inserted 23 March 2020 section 95(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 26C(9) amended 23 March 2020 section 95(5) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CW 26D: Meaning of employee
For the purposes of section CW 26C employee
a: means a person that is employed by a company; but
b: does not include a person who,—
i: is a director of the company, unless they are employed by the company:
ii: is a corporation sole, a body corporate, or an unincorporated body:
iii: with any associated person, holds 10% or more of the issued capital of the company. associated person company director employment Section CW 26D inserted 29 March 2018 section 35 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CW 26DB: Meaning of market value
For the purposes of section CW 26C market value
a: has the same meaning as in section YA 1 market value
b: includes, for a share or option quoted on the official list of a recognised exchange, at the time, an amount equal to the 5-day volume weighted average price or any other method that is accepted by the Commissioner or is comparable to the 5-day volume weighted average price, for such shares or options. Section CW 26DB inserted 23 March 2020 section 96 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CW 26E: Meaning of normal retiring age
For the purposes of section CW 26C normal retiring age
a: for an employee other than 1 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 company that employs her 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. business Commissioner company employee employment normal retiring age Section CW 26E inserted 29 March 2018 section 35 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CW 26F: Meaning of share
For the purposes of section CW 26C share company share Section CW 26F inserted 29 March 2018 section 35 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CW 26G: Meaning of trustee
For the purposes of section CW 26C trustee company employee group of persons share trustee Section CW 26G inserted 29 March 2018 section 35 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Certain income of transitional resident
CW 27: 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 2004 No 35 s CW 22B Income from living allowances, foreign superannuation, Heading amended 1 April 2014 section 18 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CW 28: Pensions
Exempt income
1: The following are exempt income:
a: a pension or allowance under the Veterans’ Support Act 2014, including a lump sum paid pursuant to an election under section 53(1)(b)
i: a veteran’s pension:
ii: a retirement lump sum paid under Part 5, subpart 7
iii: weekly income compensation paid under Part 3, subpart 4
iv: weekly compensation paid under Part 4, subpart 5
v: weekly compensation or aggregated payments, as applicable, paid under schedule 2, part 4, clause 54 55 58 59
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 amounts deducted under section 189
i: a monetary benefit paid under that Act (other than section 380
ii: a monetary benefit, other than New Zealand superannuation or a veteran’s pension, paid under section 380
b: an overseas pension to the extent to which it is subject to an arrangement under section 190 amount exempt income New Zealand superannuation overseas pension pay portable New Zealand superannuation portable veteran’s pension veteran’s pension 2004 No 35 s CW 23 Section CW 28(1)(a) replaced 31 March 2015 section 12(1) Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 Section CW 28(1)(a)(iii) inserted 31 March 2015 section 12(2) Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 Section CW 28(1)(a)(iv) inserted 31 March 2015 section 12(2) Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 Section CW 28(1)(a)(v) inserted 31 March 2015 section 12(2) Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 Section CW 28(2) replaced 26 November 2018 section 459 Social Security Act 2018 Section CW 28 list of defined terms income-tested benefit repealed 17 July 2013 section 15(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CW 28B: Foreign superannuation withdrawal in initial period of residency
A foreign superannuation withdrawal is exempt income of a person if the person—
a: meets the requirements of section CF 3(4)(a)
b: derives the foreign superannuation withdrawal in the exemption period referred to in section CF 3(6) exempt income foreign superannuation withdrawal transitional resident Section CW 28B inserted 1 April 2014 section 19 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CW 28C: Foreign superannuation withdrawal exceeding given amount
A foreign superannuation withdrawal derived by a person in the assessable period referred to in section CF 3(8)
a: calculated using the formula in section CF 3(10)
b: calculated using the formula in section CF 3(16) exempt income foreign superannuation withdrawal Section CW 28C inserted 1 April 2014 section 19 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CW 29: Reinvested amounts from foreign superannuation schemes 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: in the income year, the person 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. amount 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 2004 No 35 s CW 23B
CW 29B: Amounts from Australian complying superannuation schemes reinvested in KiwiSaver schemes
An amount of income derived in an income year by a natural person from an Australian complying superannuation scheme is exempt income if, in the income year, it is contributed to a KiwiSaver scheme. amount Australian complying superannuation scheme exempt income income income year KiwiSaver scheme Section CW 29B inserted 1 July 2013 section 13 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CW 30: 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 pay tax 2004 No 35 s CW 24
CW 31: Services for members and former members of Parliament
An amount is exempt income of a person to the extent that it is income of the person and is not exempt income of the person under another provision of subpart CW, if the amount is—
a: travel, accommodation, or communication services, and is—
i: paid under section 17 23 27 31 34 35
ii: provided to a member of Parliament (including in his or her capacity as a member of the Executive), a qualifying electoral candidate, or a family member of one of those persons:
b: the travel entitlements of a former member of Parliament (including the travel entitlements that apply in respect of a former member's spouse or partner) and is paid under section 39
c: the travel entitlements of a former Prime Minister (including the travel entitlements that apply in respect of a former Prime Minister's spouse or partner) and is paid under section 44
d: international travel, international accommodation, or communications services provided to a member of the Executive. exempt income family member pay qualifying electoral candidate CW 31 replaced 16 December 2013 section 66 Members of Parliament (Remuneration and Services) Act 2013
CW 32: 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 or de facto partner, or former spouse, former civil union partner, or former de facto partner. exempt income pay 2004 No 35 s CW 26
CW 33: Allowances and benefits
Exempt income
1: The following are exempt income:
a: a monetary benefit under the Social Security Act 2018
i: a payment of a main benefit:
ii: a payment of New Zealand superannuation equivalent assistance:
iii: a payment of veteran’s pension equivalent assistance:
b: a payment under Part 5 or 13 of the Accident Insurance Act 1998 Part 11 Accident 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:
ba: a payment under section 363 386AAG 386B
c: a participation allowance under regulations made under section 429
cb: a payment under the cost of living payments scheme, as defined in section 3(1)
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 main benefit New Zealand superannuation equivalent assistance pay tax year trustee veteran’s pension equivalent assistance 2004 No 35 s CW 27 Section CW 33(1)(a) replaced 30 April 2020 section 4(1) COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 Section CW 33(1)(a)(i) replaced 30 March 2021 section 141 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CW 33(1)(b) amended 21 December 2010 section 189 Taxation (GST and Remedial Matters) Act 2010 Section CW 33(1)(ba) replaced 1 July 2019 section 47 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section CW 33(1)(c) replaced 26 November 2018 section 459 Social Security Act 2018 Section CW 33(1)(cb) inserted 25 May 2022 section 8 Taxation (Cost of Living Payments) Act 2022 Section CW 33 list of defined terms income-tested benefit repealed 30 March 2021 section 141 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CW 33 list of defined terms main benefit inserted 30 March 2021 section 141 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CW 33 list of defined terms New Zealand superannuation equivalent assistance inserted 30 April 2020 section 4(2) COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 Section CW 33 list of defined terms veteran’s pension equivalent assistance inserted 30 April 2020 section 4(2) COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020
CW 34: 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 Crown Forest Assets Act 1989
g: payments of compensation, solatium payments, or payments to lessors for the purchase of leases under the Maori Reserved Land Amendment Act 1997 Some definitions
2: In this section,— accident insurance contract payment relating to incapacity for work
a: a payment by a friendly society, but not a payment referred to in paragraph (d) or (e) of the definition of accident compensation payment section CF 1(2)
b: 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 accident compensation payment section CF 1(2)
c: 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 accident compensation payment section CF 1(2)
d: an impairment payment made under subpart 4 accident insurance contract exempt income friendly society interest lease pay payment relating to incapacity for work sickness, accident, or death benefit fund 2004 No 35 s CW 28 Section CW 34(2) payment relating to incapacity for work inserted 7 December 2014 section 278 Veterans' Support Act 2014
CW 35: Personal service rehabilitation payments
Exempt income
1: An amount paid to a person for an income year as a personal service rehabilitation payment is exempt income of the person if—
a: they are paid the amount under the Accident Compensation Act 2001
i: in the income year; or
ii: as a reimbursement payment in a later income year; and
b: they pay an amount to another person for providing them in the income year or in an earlier income year personal service rehabilitation payment
c: the amount paid is equal to or more than the amount of personal service rehabilitation payment for the income year or an earlier income year Meaning of reimbursement payment
2: For the purposes of this section, sections DF 4 LB 7 RD 20B reimbursement payment
a: relates to a key aspect of social rehabilitation that is provided to a person in an income year; and
b: is paid to them in an income year that is later than the income year in which they were provided the rehabilitation. amount amount of tax exempt income income year pay personal service rehabilitation payment reimbursement payment 2004 No 35 s CW 28B Section CW 35 substituted 1 July 2008 section 329 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 35(1) heading inserted 18 March 2019 section 138(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 35(1)(a) replaced 18 March 2019 section 138(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 35(1)(b) amended 18 March 2019 section 138(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 35(1)(c) amended 18 March 2019 section 138(4) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 35(2) heading inserted 18 March 2019 section 138(5) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 35(2) inserted 18 March 2019 section 138(5) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 35(2) amended 1 April 2024 section 22 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CW 35(2) amended 26 June 2019 section 48 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section CW 35 list of defined terms reimbursement payment inserted 18 March 2019 section 138(6) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
CW 36: Scholarships and bursaries
A basic grant or an independent circumstances grant under regulations made under section 645 exempt income 2004 No 35 s CW 29 Section CW 36 amended 1 August 2020 section 668 Education and Training Act 2020
CW 37: Film production grants
Section CW 37 repealed 6 October 2009 section 46(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Income of certain entities
CW 38: Public authorities
Exempt income: sinking funds
1: An amount of income derived from sinking funds relating to the debt of a public authority is exempt income. Exempt income: other 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, other than an amount distributed as beneficiary income to a beneficiary who derives the amount as exempt income 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: a Fund investment entity:
db: a VCF investment vehicle as referred to in section 25
e: a company that is treated as being wholly owned by the Crown under section HR 4B and VCF Exclusion: mixed-ownership enterprises
5B: Subsection (2) does not apply to an amount of income derived by a mixed-ownership enterprise. Meaning of public authority
6: In this section, public authority amount Crown Research Institute exempt income Fund investment entity income mixed-ownership enterprise public authority State enterprise superannuation scheme trustee VCF 2004 No 35 s CW 31 Section CW 38(1) heading replaced 23 March 2020 section 97(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 38(2) heading replaced 23 March 2020 section 97(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 38(3) amended 30 June 2014 section 28 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 38(5)(d) replaced 5 June 2024 section 13(1) New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Act 2024 Section CW 38(5)(db) inserted 14 December 2019 section 17 New Zealand Superannuation and Retirement Income Amendment Act 2019 Section CW 38(5)(e) inserted 23 October 2015 section 4 Taxation (New Zealand Superannuation and Retirement Income) Act 2015 Section CW 38(5)(e) amended 14 December 2019 section 17 New Zealand Superannuation and Retirement Income Amendment Act 2019 Section CW 38(5B) heading inserted 30 June 2012 section 11 Public Finance (Mixed Ownership Model) Amendment Act 2012 Section CW 38(5B) inserted 30 June 2012 section 11 Public Finance (Mixed Ownership Model) Amendment Act 2012 Section CW 38 list of defined terms Fund investment entity inserted 5 June 2024 section 13(2) New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Act 2024 Section CW 38 list of defined terms mixed-ownership enterprise inserted 30 June 2012 section 11 Public Finance (Mixed Ownership Model) Amendment Act 2012 Section CW 38 list of defined terms VCF inserted 14 December 2019 section 17 New Zealand Superannuation and Retirement Income Amendment Act 2019
CW 38B: Public purpose Crown-controlled companies
Exempt income: sinking funds
1: An amount of income derived from sinking funds relating to the debt of a public purpose Crown-controlled company is exempt income. Exempt income: other income
2: Any other amount of income derived by a public purpose Crown-controlled company is exempt income. Exclusion: amounts received in trust
3: Subsection (2) does not apply to an amount of income that a public purpose Crown-controlled company derives as a trustee, other than an amount distributed as beneficiary income to a beneficiary who derives the amount as exempt income. Orders in Council
4: The Governor-General may, by Order in Council made on the recommendation of the Minister of Revenue, amend schedule 35
a: to add the name of a company that meets the following criteria:
i: the company is listed in schedule 4A
ii: Ministers of the Crown hold, on behalf of the Crown, more than 50% of the voting interests in the company; and
iii: all other voting interests, if any, in the company are held by local authorities; and
iv: the company’s primary purpose is the carrying out of a public policy objective of the Government of New Zealand:
b: to substitute the name of a company in recognition of a change in its name:
c: to remove the name of a company. When Minister of Revenue must recommend Order in Council under subsection (4)(c)
5: The Minister of Revenue must recommend that an Order in Council be made to remove the name of a company from schedule 35
a: the company has been removed from the register of companies kept under the Companies Act 1993
b: the company no longer meets the criteria set out in subsection (4)(a). Secondary legislation
6: An Order in Council under subsection (4) is secondary legislation ( see Part 3 amount company exempt income group of persons income income tax local authority public purpose Crown-controlled company trustee voting interest The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section CW 38B inserted 18 March 2019 section 139 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 38B(1) heading replaced 23 March 2020 section 98(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 38B(2) heading replaced 23 March 2020 section 98(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 38B(6) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section CW 38B(6) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
CW 39: Local authorities
Exempt income: sinking funds
1: An amount of income derived from sinking funds relating to the debt of a local authority is exempt income. Exempt income: other 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, other than an amount distributed as beneficiary income to a beneficiary who derives the amount as exempt income 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 from—
i: a council-controlled organisation linked by ownership or control to the local authority, other than a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority; or
ii: an organisation linked by ownership or control to the local authority that is a port company, a subsidiary of a port company, or an energy company and that would be a council-controlled organisation in the absence of section 6(4)
b: is neither rates nor a dividend. 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 2004 No 35 s CW 32 Section CW 39(1) heading replaced 23 March 2020 section 99(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 39(2) heading replaced 23 March 2020 section 99(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 39(3) amended 30 June 2014 section 29 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 39(4) replaced 1 April 2022 section 57(1) section 57(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
CW 39B: Auckland Future Fund
Exempt income
1: An amount of income derived by a trustee of the Auckland Future Fund is exempt income. Exclusion: certain amounts from commercial undertakings
2: Subsection (1) does not apply to an amount of income that—
a: is derived by a trustee of the Auckland Future Fund from—
i: a council-controlled organisation of Auckland Council; or
ii: an organisation linked by ownership or control to Auckland Council that is a port company, a subsidiary of a port company, or an energy company, and that would be a council-controlled organisation of Auckland Council in the absence of section 6(4)
b: is not—
i: rates; or
ii: a dividend. Meaning of Auckland Future Fund
3: In this section, Auckland Future Fund
a: means the fund established by Auckland Council as part of its Long-term plan 2024–2034; and
b: includes—
i: any funds, assets, or both that the Council adds to the fund; and
ii: capital and income retained in the fund. Meaning of Auckland Council
4: In this section, Auckland Council section 6(1) amount Auckland Council Auckland Future Fund council-controlled organisation dividend exempt income income trustee Section CW 39B inserted 29 March 2025 section 28(1) section 28(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CW 40: 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 2004 No 35 s CW 33 Section CW 40 list of defined terms associated person repealed 6 October 2009 section 47 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CW 40B: Te Urewera Board
Exempt income
1: To the extent to which it is applied for the purposes set out in the Te Urewera Act 2014 Definition
2: In this section, Te Urewera Board section 7 Section CW 40B inserted 28 July 2014 section 40(6) Te Urewera Act 2014
CW 40C: Te Pou Tupua
Exempt income
1: An amount of income derived by Te Pou Tupua (as defined in the Te Awa Tupua (Whanganui River Claims Settlement) Act 2017 Exclusion
2: However, subsection (1) does not apply for an amount of income under section CH 11 amount exempt income income Section CW 40C inserted 21 March 2017 section 26(3) Te Awa Tupua (Whanganui River Claims Settlement) Act 2017 Section CW 40C(1) heading inserted 29 March 2018 section 36(a) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 40C(2) heading inserted 29 March 2018 section 36(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 40C list of defined terms amount inserted 29 March 2018 section 36(c) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 40C list of defined terms exempt income inserted 29 March 2018 section 36(c) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 40C list of defined terms income inserted 29 March 2018 section 36(c) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CW 40D: Te Tōpuni Kōkōrangi
Exempt income
1: An amount of income derived by Te Tōpuni Kōkōrangi (as defined in Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025 Exclusion
2: However, subsection (1) does not apply for an amount of income under section CH 11B Section CW 40D inserted 2 February 2025 section 57(3) Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025
CW 40E: Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025 asset management company
Exempt income
1: An amount of income derived by the asset management company (as defined in Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025 Exclusion
2: However, subsection (1) does not apply for an amount of income under section CH 11C Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025 Section CW 40E inserted 2 February 2025 section 57(3) Te Ture Whakatupua mō Te Kāhui Tupua 2025/Taranaki Maunga Collective Redress Act 2025
CW 41: Charities: non-business income
Exempt income
1: The following are exempt income:
aa: an amount of income derived by a person who is removed from the register of charitable entities (the register Charities Act 2005
i: the day on which the person does not comply with the person's rules contained in the register:
ii: the day of final decision:
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
2: 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, a tax charity Exclusion: business income
3: 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
4: This section does not apply to an amount of 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. Definition
5: Tax charity
a: a trustee Charities Act 2005
b: a trustee entity
i: has started, before 1 July 2008, to take reasonable steps in the process of preparing an application for registering the entity as a charitable entity under the Charities Act 2005
ii: intends to complete the process of preparing an application described in subparagraph (i); and
iii: has not been notified by the Commissioner that the entity is not a tax charity:
c: a trustee Charities Act 2005 unavailable:
d: a person who is removed from the register, in the period starting with the day they are registered on the register and ending with the earlier of the following days:
i: the day on which the person does not comply with the person's rules contained in the register:
ii: the day of final decision. amount business charitable purpose council-controlled organisation day of final decision exempt income income local authority notify tax charity trustee 2004 No 35 s CW 34 Section CW 41(1)(aa) inserted 30 June 2014 section 30(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 41(2) amended 1 July 2008 section 20(1) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 Section CW 41(4) substituted 1 April 2008 section 331 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 41(5) heading added 1 July 2008 section 20(2) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 Section CW 41(5) added 1 July 2008 section 20(2) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 Section CW 41(5) amended 1 April 2019 section 140 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 41(5)(a) amended 29 March 2018 section 37(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 41(5)(b) amended 29 March 2018 section 37(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 41(5)(c) amended 29 March 2018 section 37(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CW 41(5)(c) amended 30 June 2014 section 30(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 41(5)(d) inserted 30 June 2014 section 30(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 41 list of defined terms day of final decision inserted 30 June 2014 section 30(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 41 list of defined terms notify inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CW 41 list of defined terms registered as a charitable entity repealed 1 July 2008 section 20(3) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 Section CW 41 list of defined terms tax charity inserted 1 July 2008 section 20(3) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008
CW 42: 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 41(1)
aa: the entity carrying on the business is, at the time that the income is derived, registered as a charitable entity under the Charities Act 2005
a: the trust, society, or institution carries out its charitable purposes in New Zealand; and
b: the trustee or trustees of the trust, the society, or the institution is or are, at the time that the income is derived, a tax charity
c: no person with some control over the business is able to direct or divert an amount derived from the business to the benefit or advantage of,—
i: if subparagraph (ii) does not apply, a person other than the trust, society, or institution except for a purpose of the trust, society, or institution:
ii: if a trust, society, or institution (the operating entity controlling entity Subsections (3) to (8) expand on this subsection. Exclusion
2: This section does not apply to an amount of 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)(c) and section CW 42B(2)(c) and (4)
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) and section CW 42B(2)(c) and (4)
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)(c) and section CW 42B(2)(c) and (5)
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 relevent 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 statutory trustee company; or
iii: are Public Trust; or
iv: are the Maori Trustee. Benefit or advantage
8: For the purposes of subsection (1)(c) and section CW 42B(2)(c) and (6)
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 23
iii: section CB 32
iv: sections CC 1 CC 3 to CC 8 CC 9
v: section CD 1
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:
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)(c) amount associated person business charitable purpose company council-controlled organisation director exempt income income income year interest local authority money lent New Zealand pay shareholder statutory trustee company tax charity trustee trustee income 2004 No 35 s CW 35 Section CW 42(1)(aa) inserted 1 April 2020 section 141(1) section 141(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 42(1)(b) amended 1 July 2008 section 21(1) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 Section CW 42(1)(c) replaced 24 February 2016 section 84(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 42(2) substituted 1 April 2008 section 332 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 42(5) amended 24 February 2016 section 84(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 42(5) amended 30 June 2014 section 31(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 42(6) amended 30 June 2014 section 31(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 42(7) amended 30 June 2014 section 31(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 42(8) amended 30 June 2014 section 31(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 42(9) amended 6 October 2009 section 48 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 42 list of defined terms tax charity inserted 1 July 2008 section 21(2) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008
CW 42B: Community housing trusts and companies
Exempt income
1: An amount of income derived by a community housing entity is exempt income. Definition
2: In this section and section LD 3 community housing entity a trustee or company (the entity activities
aa: the entity is Public and Community Housing Management Act 1992
a: the activities are not carried on for the private pecuniary profit of any individual; and
b: all profit is retained by the entity, or distributed or applied to—
i: community housing entities that meet the requirements to derive exempt income under this section:
ii: beneficiaries or clients of the entity:
iii: tax charities:
iv: persons to whom distributions would be in accordance with charitable purposes; and
c: no person with some control over the activities is able to direct or divert an amount derived from the activities to the benefit or advantage of,—
i: if subparagraph (ii) does not apply, a person other than the entity except for a purpose of the entity or a charitable purpose:
ii: if the entity (the operating entity controlling entity Definition: exception
3: Despite subsection (2), community housing entity a trustee or company (the entity
a: more than 15% of the people who become beneficiaries or clients of the entity on a date that is or is after 14 April 2014 have, on that date, income or assets exceeding a value (the entry threshold schedule 34
b: the provision of housing or housing assistance to a beneficiary or client who has income and assets not exceeding the entry thresholds is substantially different from the provision of housing or housing assistance to a beneficiary or client who has income or assets exceeding an entry threshold. Control over activities
4: For the purposes of subsection (2)(c), for an income year, a person is treated as having some control over the activities, and as being able to direct or divert amounts from the activities section CW 42(5)(a) and (b) and (6) No control
5: For the purposes of subsection (2)(c), a person described in section CW 42(7)(a) and (b) section CW 42(7)(a) and (b) Benefit or advantage
6: For the purposes of subsection (2)(c), a benefit or advantage to a person includes a benefit or advantage included under section CW 42(8) amount charitable purpose community housing entity exempt income income income year tax charity Section CW 42B inserted 30 June 2014 section 32(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 42B(2) amended 24 February 2016 section 85(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 42B(2)(aa) inserted 30 June 2014 section 32(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 42B(2)(aa) amended 1 October 2019 section 33 Kāinga Ora–Homes and Communities Act 2019 Section CW 42B(2)(c) replaced 24 February 2016 section 85(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 42B(3) amended 24 February 2016 section 85(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 42B(3)(a) replaced 24 February 2016 section 85(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 42B(3)(b) replaced 24 February 2016 section 85(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CW 42B(4) amended 24 February 2016 section 85(5) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CW 43: 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 of 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 41(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 41 Timing of registration as charitable entity
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, a tax charity Requirements of sections CW 41 and CW 42 disregarded
5: For the purposes of subsection (4), until the end of the income year that follows the income year in which the deceased died, the requirements of sections CW 41 CW 42 a tax charity Amounts derived after end of certain period
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, a tax charity amount business distribution exempt income income New Zealand tax charity 2004 No 35 s CW 36 Section CW 43(4) amended 1 July 2008 section 22(1) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 Section CW 43(5) amended 1 July 2008 section 22(2) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 Section CW 43(6) amended 1 July 2008 section 22(3) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 Section CW 43 list of defined terms registered as a charitable entity repealed 1 July 2008 section 22(4) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 Section CW 43 list of defined terms tax charity inserted 1 July 2008 section 22(4) Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008
CW 44: 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 2004 No 35 s CW 37
CW 45: 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, and dependants of employees of the employer:
iii: surviving spouses, civil union partners, de facto partners, and surviving dependants of deceased employees of the employer; and
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 pay trustee 2004 No 35 s CW 38
CW 46: Bodies promoting amateur games and sports
An amount of income derived by a club, society, association, or trustee or trustees of a trust (the promoter
a: the promoter
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 promoter shareholder, beneficiary amount associated person beneficiary exempt income income trustee 2004 No 35 s CW 39 Section CW 46 amended 30 June 2014 section 33(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 46(a) amended 30 June 2014 section 33(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 46(c) amended 30 June 2014 section 33(3)(a) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 46(c) amended 30 June 2014 section 33(3)(b) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 46 list of defined terms beneficiary inserted 30 June 2014 section 33(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CW 46 list of defined terms trustee inserted 30 June 2014 section 33(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CW 47: TAB NZ Exempt income: racing organisations
1: An amount of income derived by any of the following bodies is exempt income:
a: TAB NZ
b: New Zealand Thoroughbred Racing:
c: Harness Racing New Zealand:
d: the New Zealand Greyhound Racing Association (Incorporated):
e: the Racing Integrity Board:
f: Racing New Zealand. Exempt income: racing clubs
2: An amount of income derived by a racing club, as defined in section 5(1) amount associated person exempt income income 2004 No 35 s CW 40 Section CW 47 heading amended 1 August 2020 section 129 Racing Industry Act 2020 Section CW 47(1)(a) amended 1 August 2020 section 129 Racing Industry Act 2020 Section CW 47(1)(e) inserted 30 March 2022 section 58 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CW 47(1)(f) inserted 30 March 2022 section 58 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CW 47(2) amended 1 August 2020 section 129 Racing Industry Act 2020
CW 48: 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 by a gaming-machine operator’s licence and a gaming-machine venue licence; and
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 2004 No 35 s CW 40B
CW 49: 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 2004 No 35 s CW 41
CW 50: 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 2004 No 35 s CW 42
CW 51: 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 2004 No 35 s CW 43
CW 52: Community trusts
An amount of income derived by the trustee of a community trust is exempt income. amount community trust exempt income income trustee 2004 No 35 s CW 44
CW 52B: Disability support services
Exempt income
1: An amount of income derived by or on behalf of a person or their carer is exempt income of the relevant person if the amount is paid by Health New Zealand , Ministry of Disabled People Meaning
2: In this section, disability support services section 4 exempt income income pay person Section CW 52B inserted 18 March 2019 section 142(1) section 142(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CW 52B(1) amended 29 March 2025 section 29 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CW 52B(1) amended 30 June 2024 section 43 Pae Ora (Disestablishment of Māori Health Authority) Amendment Act 2024 Section CW 52B(1) amended 28 March 2024 section 23 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CW 52B(1) amended 1 July 2022 section 104 Pae Ora (Healthy Futures) Act 2022 Section CW 52B(2) disability support services amended 1 July 2022 section 104 Pae Ora (Healthy Futures) Act 2022
CW 53: Distributions from complying trusts
To the extent to which section HC 20 amount complying trust distribution exempt income 2004 No 35 s HH 3(5)
CW 54: Foreign-sourced amounts derived by trustees
To the extent to which section HC 26 exempt income foreign-sourced amount income year non-resident resident in New Zealand trustee 2004 No 35 s HH 4(3B)
CW 55: Maori authority distributions
A distribution from a Maori authority to a member, to the extent to which it is not income under section CV 11 exempt income income Maori authority member 2004 No 35 s HI 5(1)
CW 55BA: Tertiary education institutions and subsidiaries
Exempt income
1: An amount of income derived by a tertiary education institution or a tertiary education subsidiary is exempt income. Tertiary education subsidiary
2: In this section, a tertiary education subsidiary
a: in which the tertiary education institution, alone or together with other tertiary education institutions, holds—
i: voting interests in the company adding up to 100%; or
ii: market value interests in the company adding up to 100%, when a market value circumstance exists; and
b: where no person, other than a tertiary education institution, with some control over the company is able to direct or divert, to their own benefit or advantage, an amount derived from the company. Control over company
3: For the purposes of subsection (2)(b), for an income year, a person is treated as having some control over the company and as being able to direct or divert amounts from the company if, in the corresponding tax year, they are described in section CW 42(5)(a) and (b) No control over company
4: For the purposes of subsection (2)(b), a person described in section CW 42(7)(a) and (b) Benefit or advantage
5: For the purposes of subsection (2)(b), a benefit or advantage is one that would be a benefit or advantage under section CW 42(1)(c) and (8) amount company exempt income income market value circumstance market value interest tertiary education institution tertiary education subsidiary voting interest Section CW 55BA replaced 24 February 2016 section 86(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CW 55BAB: Rebate of fees paid by FIF
When this section applies
1: This section applies to a person having an attributing interest in a foreign investment fund when—
a: the FIF pays fees to another person; and
b: the person derives, from the other person, a rebate of the fees; and
c: the person is not allowed a deduction for the fees; and
d: the person's FIF income or loss from the interest is not calculated using the comparative value method. Exempt income
2: The amount of the rebate is exempt income. attributing interest comparative value method deduction exempt income FIF foreign investment fund loss pay Section CW 55BAB inserted 27 February 2014 section 20(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CW 55BAB(2) heading inserted 30 March 2025 section 30 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CW 55BB: Minors' income, to limited extent
When this section applies
1: This section applies for a tax year to a person, other than an absentee, when the person is—
a: younger than 15:
b: younger than 18, and attends a registered school as defined in section 10(1)
c: younger than 19, and—
i: was a person to whom paragraph (b) applied during the previous tax year; and
ii: turned 18 on or after 1 January in that previous tax year; and
iii: continues to attend a school of a kind referred to in paragraph (b). Exempt income—if less than limit
2: An amount of income derived by the person in the tax year is exempt income if—
a: the income is none of—
i: a PAYE income payment from which the person's employer is required to withhold tax under the PAYE rules:
ii: resident passive income:
iii: non-resident passive income:
iiib: beneficiary income:
iv: excluded income:
v: exempt income under another provision; and
b: the person derives in the tax year a total amount of income meeting the requirements of paragraph (a) that is less than $2,340. absentee beneficiary income employer excluded income exempt income income non-resident passive income PAYE income payment PAYE rules resident passive income tax tax year Section CW 55BB inserted 29 May 2012 section 4(1) Taxation (Budget Measures) Act 2012 Section CW 55BB(1)(b) replaced 1 August 2020 section 668 Education and Training Act 2020 Section CW 55BB(2)(a)(i) replaced 17 July 2013 section 17(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CW 55BB(2)(a)(iiib) inserted 30 March 2021 section 20(1) section 20(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CW 55BB list of defined terms beneficiary income inserted 30 March 2021 section 20(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CW 55BB list of defined terms employer inserted 17 July 2013 section 17(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CW 55BB list of defined terms PAYE rules inserted 17 July 2013 section 17(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CW 55BB list of defined terms tax inserted 17 July 2013 section 17(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Partners and partnerships Heading inserted 1 April 2008 section 8(1) Taxation (Limited Partnerships) Act 2008
CW 55B: Amounts of exempt income for partners
A person who is a partner has an amount of exempt income to the extent to which an amount of exempt income results from the application of subpart HG amount exempt income partner partnership Section CW 55B inserted 1 April 2008 section 8(1) Taxation (Limited Partnerships) Act 2008 Income from certain activities
CW 56: 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 2004 No 35 s CW 45 Section CW 56(1) amended 23 March 2020 section 100(1) section 100(5) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 56(3) air transport from New Zealand replaced 23 March 2020 section 100(2) section 100(5) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 56(3) air transport to New Zealand inserted 23 March 2020 section 100(3) section 100(5) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 56 list of defined terms air transport to New Zealand inserted 23 March 2020 section 100(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CW 57: 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 1 January 2025
b: ends on 31 December 2029 Some definitions
2: In this section,— exploration and development activities
a: means the following activities undertaken for the purposes of identifying and developing exploitable petroleum deposits or occurrences in an offshore permit area:
i: operating a ship to provide seismic or electromagnetic survey readings:
ii: drilling an exploratory well or other well; but
b: does not include using a drilling rig of modular construction that is installed on an existing offshore platform 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 2004 No 35 s CW 45B Section CW 57(1)(a) replaced 1 January 2020 section 51 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section CW 57(1)(a) amended 1 January 2025 section 24(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CW 57(1)(b) replaced 1 January 2020 section 51 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section CW 57(1)(b) amended 1 January 2025 section 24(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CW 57(2) exploration and development activities replaced 1 January 2015 section 34(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CW 58: Disposal of companies’ own shares
An amount of income derived by a company from disposing of shares in the company, including if the company disposes of the shares as the result of the application of section CE 6
a: the company acquired the shares, including if the company acquired the shares as the result of the application of section CE 6
b: the acquisition was treated under section 67A(1) amount cancellation company exempt income income share 2004 No 35 s CW 46 Section CW 58 amended 30 March 2021 section 21(1) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CW 58(a) amended 30 March 2021 section 21(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
CW 59: New Zealand companies operating in Niue
Exempt income: income wholly or mainly from Niue
1: An amount of income derived by a company incorporated in New Zealand 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 income year in which the amount is derived be a controlled foreign company. Exempt income: dividends
3: A dividend derived from a company incorporated in New Zealand 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 income year in which the amount is derived; or
c: a trustee of a trust of which a settlor or beneficiary is resident in New Zealand during the income year in which the amount is derived. Exempt income: Niue development projects
4: An amount of income derived by a company incorporated in New Zealand 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. Secondary legislation
8: An Order in Council under this section is secondary legislation ( see Part 3 amount attributed CFC income business company controlled foreign company dividend exempt income FIF FIF rules foreign company income income year resident in New Zealand settlor source in New Zealand trustee 2004 No 35 s CW 47 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section CW 59(8) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section CW 59(8) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
CW 59B: Income of and distributions by certain international funds
Trustees
1: An amount derived by a person is exempt income of the person if they are—
a: the trustee of the Niue International Trust Fund:
b: the trustee of the Tokelau International Trust Fund. Distributions
2: An amount derived by a person is exempt income of the person 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 2004 No 35 ss CW 49C CW 49D Section CW 59B inserted 1 April 2008 section 333 Taxation (Business Taxation and Remedial Matters) Act 2007
CW 59C: Life reinsurance claims from reinsurer outside New Zealand
An amount of life reinsurance claim derived by a life insurer is exempt income to the extent to which, for the relevant life reinsurance policy, deductions for premiums are denied under section DR 3 (Life reinsurance premiums to reinsurer outside New Zealand) amount claim deduction exempt income income life insurer life reinsurance life reinsurance policy New Zealand premium Section CW 59C inserted 1 July 2010 section 49(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 59C heading replaced 1 July 2018 section 7(1) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section CW 59C amended 1 July 2018 section 7(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018
CW 60: 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 Industry Act 2020
b: the race is held outside New Zealand. exempt income New Zealand pay 2004 No 35 s CW 48 Section CW 60(a) amended 1 August 2020 section 129 Racing Industry Act 2020
CW 61: Providing standard-cost household service
Exempt income under determination
1: An amount of income derived in an income year by a natural person from providing a standard-cost household service is exempt income if the amount is exempt income under a determination made under section 91AA(2)(a) When amount treated as expenditure
2: If subsection (1) does not apply, and the amount of standard-cost household service is less than the amount of income of the person, the person is treated, under a determination made under section 91AA of that Act, as incurring an amount of expenditure in providing the services. Allocation
3: For the purposes of subsection (2), the allocation of the amount of the expenditure occurs under section BD 4 amount deduction exempt income income income tax liability income year standard-cost household service 2004 No 35 s CW 49
CW 62: Interest paid under the KiwiSaver Act 2006
Interest paid by the Commissioner under section 84 Commissioner exempt income interest 2004 No 35 s CW 49B
CW 62B: Voluntary activities
Exempt income
1: When a volunteer, in undertaking a voluntary activity, derives an amount that is a reimbursement payment to cover actual expenses incurred by them, the amount is exempt income of the volunteer. Estimated expenditure
2: For the purposes of subsection (1)—
a: a person may make a reasonable estimate of the amount of expenditure likely to be incurred by the volunteer for which reimbursement is payable; and
b: the amount estimated is treated as if it were the amount incurred. Payments partly reimbursement and partly honorarium
3: If the person paying the amount to the volunteer makes a payment to them that is only partly a reimbursement of expenses, the person must identify the portion of the amount that is the reimbursement, and treat the remainder as an honorarium, being a schedular payment to which the PAYE rules apply. Who is a volunteer?
4: For the purposes of this section, a volunteer
a: chosen either by themselves or by a group of which they are a member; and
b: that provides a benefit to a community or another person; and
c: for which there is no purpose or intention of private pecuniary profit for the person. Honoraria
5: For the purposes of this section honorarium
a: is paid at a rate that is less than the market rate for providing the services; and
b: is an amount for which, in the normal course, no payment is fixed for the services provided. Nature of reimbursement payment
6: For the purposes of this section, it does not matter whether—
a: an amount of a reimbursement payment is paid in 1 sum or not:
b: the amount is paid during an income year or at the end of an income year. Relationship with section RD 8(3)
7: A determination made by the Commissioner under section RD 8(3) amount exempt income honorarium income year New Zealand pay PAYE rules schedular payment volunteer Section CW 62B inserted 6 October 2009 section 50(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 62B(5) amended 7 September 2010 section 15(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CW 62C: Income from foreign-currency loans used for disallowed residential property
Section CW 62C repealed 1 April 2025 section 25 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CW 63: Avoidance arrangements
An amount is exempt income if it is treated as exempt income under—
a: section GA 1
b: section GB 23 amount exempt income 2004 No 35 ss GB 1(1)–(2C) GD 3(1), (2)
CW 64: 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 2004 No 35 s CW 50 Restructuring under New Zealand Railways Corporation Restructuring Act 1990 Heading inserted 17 July 2013 section 18 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CW 65: New Zealand Railways Corporation restructure: exempt income
Railways vesting and land-related payments
1: The following are exempt income of KiwiRail Holdings Limited and any company in which it directly or indirectly owns 100% of the shares ( wholly-owned subsidiary
a: an amount derived from the Railways vesting:
b: an amount derived by KiwiRail Holdings Limited or a wholly-owned subsidiary in relation to—
i: a disposal or grant of land, if that land is owned on 31 December 2012 by the Crown or New Zealand Railways Corporation:
ii: the termination or variation of a lease granted by the Crown or New Zealand Railways Corporation over land, if that land is owned on 31 December 2012 by the Crown or New Zealand Railways Corporation. Meaning of Railways vesting
2: In this section, Railways vesting section EZ 68 amount company dispose exempt income land lease Railways vesting share Section CW 65 inserted 17 July 2013 section 18 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CX: Excluded income
Contents
Goods and services tax
CX 1: Goods and services tax
The following are excluded income of a registered person:
a: output tax on goods and services they supply:
b: goods and services tax (GST) payable to them by the Commissioner. Commissioner excluded income goods GST GST payable output tax pay registered person services 2004 No 35 s CX 1
CX 1B: Treatment of flat-rate credits under platform economy rules
Excluded income
1: For the purposes of the flat-rate credit, as defined in section 2(1) When credits not excluded income
2: Subsection (1) does not apply to a person who, for an income year,—
a: is an underlying supplier; and
b: receives a flat-rate credit for which they are not required to make an adjustment under section 20(4E)
c: includes the amount of the credit in their income as described in section CH 5B amount excluded income income income year registered person Section CX 1B inserted 1 April 2024 section 24B Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 1B(1) heading inserted 29 March 2025 section 31(1) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CX 1B(2) heading inserted 29 March 2025 section 31(2) section 31(4) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CX 1B(2) inserted 29 March 2025 section 31(2) section 31(4) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CX 1B list of defined terms income inserted 29 March 2025 section 31(3) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CX 1B list of defined terms income year inserted 29 March 2025 section 31(3) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 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 9 CX 10 CX 12 to CX 16
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 RD
4: Sections RD 25 to RD 63 Arrangements
5: A benefit may be treated for the purposes of the FBT rules as being provided by an employer to an employee under—
a: section GB 31
b: section GB 32 arrangement associated person employee employer employment FBT rules fringe benefit unclassified benefit 2004 No 35 s CX 2 Section CX 2(5) amended 1 April 2010 section 51(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 2 list of defined terms FBT rules inserted 1 April 2010 section 51(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CX 3: Excluded income
A fringe benefit is excluded income of the employee. employee excluded income fringe benefit 2004 No 35 s CX 3
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 2004 No 35 s CX 4
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:
b: an allowance that is exempt income under section CW 17 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 fringe benefit interest pay 2004 No 35 s CX 5 Section CX 5(2)(a) repealed 30 March 2017 section 36 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 5 list of defined terms expenditure on account of an employee repealed 29 March 2018 section 38 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CX 5 list of defined terms life insurance policy repealed 29 March 2018 section 38 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CX 5 list of defined terms premium repealed 29 March 2018 section 38 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 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 work-related vehicle. Exclusion: election by close company
2B: Subsection (1) does not apply if the employee is a shareholder-employee of a close company and the close company made an election under section CX 17(4B) subpart DE 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. close company emergency call employee FBT rules fringe benefit lease motor vehicle private use shareholder-employee work-related vehicle 2004 No 35 s CX 6 Section CX 6(2B) heading inserted 1 April 2017 section 67(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 6(2B) inserted 1 April 2017 section 67(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 6 list of defined terms close company inserted 1 April 2017 section 67(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 6 list of defined terms FBT rules inserted 1 April 2017 section 67(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 6 list of defined terms shareholder-employee inserted 1 April 2017 section 67(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017
CX 7: 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 fringe benefit tax (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 fringe benefit tax lease motor vehicle 2004 No 35 s CX 6B
CX 8: 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 contribution employee employer fringe benefit motor vehicle pay private use 2004 No 35 s CX 7
CX 9: Subsidised transport
A fringe benefit arises when an employer provides subsidised transport to an employee , unless section CX 19C CX 19D employee employer fringe benefit subsidised transport 2004 No 35 s CX 8 Section CX 9 amended 1 April 2023 section 25(1) section 25(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CX 10: 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 an exempt ESS
bb: as an amount that is a PAYE-related overpayment:
c:
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 sections RD 25 to RD 63
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 exempt ESS fringe benefit income pay PAYE-related overpayment tax year 2004 No 35 s CX 9 Section CX 10(2)(b) amended 31 March 2023 section 26(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 10(2)(bb) inserted 1 April 2019 section 143(1) section 143(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CX 10(2)(c) repealed 1 April 2011 section 16(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CX 10 list of defined terms exempt ESS inserted 31 March 2023 section 26(2)(a) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 10 list of defined terms PAYE-related overpayment inserted 1 April 2019 section 143(2) section 143(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CX 10 list of defined terms share purchase scheme repealed 31 March 2023 section 26(2)(b) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 10 list of defined terms superannuation fund repealed 1 April 2011 section 16(2) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
CX 11: 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 2004 No 35 s CX 10
CX 12: Services for members and former members of Parliament
When fringe benefit arises
1: A fringe benefit arises when travel, accommodation, and communications services are exempt income under section CW 31 Relationship with sections CX 5 and CX 28
2: This section overrides sections CX 5 CX 28 exempt income fringe benefit Section CX 12 replaced 16 December 2013 section 66 Members of Parliament (Remuneration and Services) Act 2013
CX 13: 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 an employer's superannuation cash contribution. contribution employee employer employer's superannuation cash contribution fringe benefit superannuation scheme 2004 No 35 s CX 12 Section CX 13(2) substituted 6 October 2009 section 52(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 13 list of defined terms employer's superannuation cash contribution inserted 6 October 2009 section 52(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 13 list of defined terms employer's superannuation contribution repealed 6 October 2009 section 52(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CX 14: 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 2004 No 35 s CX 13
CX 15: Contributions to funeral trusts
A fringe benefit arises when an employer makes a contribution to a fund in the circumstances described in section CW 45 contribution employer fringe benefit 2004 No 35 s CX 14
CX 16: 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
a: life insurance under section EY 8
b: accident or medical insurance referred to in section EY 8(3)
c: insurance against accident, disease, or sickness, whether fatal or not, suffered by the employee, their spouse, civil union partner, or de facto partner, or their child. Life insurance
4: Life insurance: pension benefit
5: Health insurance
6: contribution de facto partner employee employer friendly society fringe benefit life insurance pay premium specified insurance premium year 2004 No 35 s CX 15 Section CX 16(3) heading replaced 30 March 2017 section 37(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 16(3) replaced 30 March 2017 section 37(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 16(4) heading repealed 30 March 2017 section 37(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 16(4) repealed 30 March 2017 section 37(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 16(5) heading repealed 30 March 2017 section 37(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 16(5) repealed 30 March 2017 section 37(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 16(6) heading repealed 30 March 2017 section 37(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 16(6) repealed 30 March 2017 section 37(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 16 list of defined terms de facto partner inserted 30 March 2017 section 37(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 16 list of defined terms premium inserted 30 March 2017 section 37(5) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CX 17: 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: benefit provided to non-executive director
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: in the absence of section CD 32 section CD 4 Transfers of company value shareholder; and
b: in the absence of section CX 4 Exclusion: election by close company
4B: Despite subsection (4), subsection (2) does not apply and the benefit is neither a fringe benefit nor a dividend in an income year if—
a: the benefit—
i: arises when a close company makes a motor vehicle available to a shareholder-employee for their private use; and
ii: would, in the absence of this subsection, be a fringe benefit arising under section CX 6
b: the total benefits the close company provides to all employees in the income year are 1 or 2 of the benefits described in paragraph (a)
c: the close company chooses to apply subpart DE When election may be made
4C: An election by a close company under subsection (4B) may be made for the income year which includes the day on which the close company—
a: acquires the motor vehicle; or
b: first starts using the motor vehicle for business use. Election continues to apply
4D: An election under subsection (4B) applies for the income year described in subsection (4C)
a: the day on which the close company stops using the motor vehicle for business use; or
b: the day on which the close company disposes of the motor vehicle. Notice of election under subsection (2)
5: The company or trustee must give notice to the Commissioner of the election referred to in subsection (2) in the time allowed for filing a fringe benefit tax return for the period in which the benefit was provided. Notice of election under subsection (4B)
5B: The close company must give notice to the Commissioner of an election referred to in subsection (4B) Relationship with subpart DG
6: Section DG 2(4) business use close company Commissioner company dividend employee employment FBT rules fringe benefit fringe benefit tax group investment fund income year investor motor vehicle non-executive director notice return return of income share shareholder shareholder-employee trustee unclassified benefit 2004 No 35 s CX 16 Section CX 17(3) heading replaced 1 April 2017 section 68(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17(4)(a) amended 23 March 2020 section 101 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CX 17(4)(a) amended 7 September 2010 section 17(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CX 17(4B) heading inserted 1 April 2017 section 68(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17(4B) inserted 1 April 2017 section 68(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17(4C) heading inserted 1 April 2017 section 68(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17(4C) inserted 1 April 2017 section 68(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17(4D) heading inserted 1 April 2017 section 68(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17(4D) inserted 1 April 2017 section 68(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17(5) heading amended 1 April 2017 section 68(3) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17(5B) heading inserted 1 April 2017 section 68(4) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17(5B) inserted 1 April 2017 section 68(4) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17(6) heading inserted 17 July 2013 section 20(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CX 17(6) inserted 17 July 2013 section 20(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CX 17 list of defined terms business use inserted 1 April 2017 section 68(5) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17 list of defined terms close company inserted 1 April 2017 section 68(5) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17 list of defined terms income year inserted 1 April 2017 section 68(5) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17 list of defined terms motor vehicle inserted 1 April 2017 section 68(5) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17 list of defined terms return of income inserted 1 April 2017 section 68(5) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section CX 17 list of defined terms shareholder-employee inserted 1 April 2017 section 68(5) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017
CX 18: Benefits provided to associates of both employees and shareholders
When this section applies
1: This section applies when—
a: a benefit provided to an associated person of an employee would be treated as a fringe benefit under section GB 32 section CX 4
b: the employer is a company; and
c: the associated person is also associated with a shareholder in the company; and
d: the associated person is not a company; and
e: the associated person is not a shareholder in the company; and
f: the benefit would be a dividend if provided to the shareholder. FBT rules apply, not dividend rules
2: The benefit is subject to the FBT rules and is treated as not being a dividend. associated person company dividend employee employer FBT rules fringe benefit shareholder 2004 No 35 s GC 15(3), (4) Exclusions and limitations
CX 19: 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 17
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 18(3) transport costs); or
c: an amount that, if it had been paid, would have been exempt income under sections CW 16B to CW 16F CW 17B CW 17CB CW 17CC CW 17D 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 1 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 pay relative 2004 No 35 s CX 17 Section CX 19(1)(b)(ii) amended 6 October 2009 section 53 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 19(1)(c) added 6 October 2009 section 53 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 19(1)(c) amended 1 April 2025 section 32 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CX 19(1)(c) amended 1 April 2015 section 35 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CX 19B: 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. employee employer fringe benefit motor vehicle Section CX 19B inserted 30 March 2017 section 38(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CX 19C: Certain public transport
Travel between home and work
1: A fare that an employer subsidises mainly for the purposes of an employee travelling between their home and place of work is not a fringe benefit if the fare—
a: is a public transport fare for 1 or more of the following:
i: bus service:
ii: rail vehicle:
iii: ferry:
iv: cable car:
b: is partly funded by the Total Mobility Scheme administered by Waka Kotahi. Meaning of bus service
2: Bus service
a: a service that can be reserved for use by a single person or a self-selected group of people:
b: a shuttle service as defined in section 5 Meaning of public transport fare
3: Public transport fare Meaning of rail vehicle
4: Rail vehicle section 4(1) bus service employee fringe benefit public transport fare rail vehicle Section CX 19C inserted 1 April 2023 section 27(1) section 27(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CX 19D: Certain self-powered and low-powered vehicles and vehicle-share services
Self-powered or low-powered vehicles
1: A vehicle that an employer provides to an employee for the main purpose of the employee travelling between their home and place of work is not a fringe benefit if the vehicle is—
a: a bicycle:
b: an electric bicycle:
c: a scooter:
d: an electric scooter:
e: any other vehicle declared under section 168A
i: a mobility device; or
ii: not a motor vehicle. Payment of vehicle-share service costs
2: A benefit that an employer provides to an employee in the form of assistance with the payment of the employee’s costs of using a vehicle-share service for the main purpose of an employee travelling between their home and place of work is not a fringe benefit if the vehicle-share service provides use of 1 or more of the following vehicles to the employee:
a: a bicycle:
b: an electric bicycle:
c: a scooter:
d: an electric scooter:
e: any other vehicle declared under section 168A
i: a mobility device; or
ii: not a motor vehicle. Regulations
3: For the purposes of subsections (1) and (2), the Governor-General may, by Order in Council made on the recommendation of the Minister of Revenue, make regulations specifying—
a: the maximum allowable cost of the vehicle referred to in subsection (1); and
b: requirements for any vehicle referred to in subsections (1) and (2). Meaning of vehicle-share service
4: In this section, vehicle-share service Secondary legislation
5: Regulations made under this section are secondary legislation ( see Part 3 employee employer fringe benefit The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section CX 19D inserted 1 April 2023 section 27(1) section 27(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 19D(5) heading inserted 28 March 2024 section 26 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CX 19D(5) inserted 28 March 2024 section 26 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CX 20: 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 2004 No 35 s CX 18
CX 21: 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 2004 No 35 s CX 18B
CX 22: Benefits to non-executive directors
A transfer of company value section CD 20(2) dividend fringe benefit non-executive director transfer of company value 2004 No 35 s CX 19 Section CX 22 amended 23 March 2020 section 102(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CX 22 list of defined terms transfer of company value inserted 23 March 2020 section 102(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CX 22 list of defined terms transfer of value repealed 23 March 2020 section 102(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CX 23: 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 used or consumed
i: the employer:
ii: a company that is part of the same group of companies as the employer:
b: provided to the employee by a company that is part of the same group of companies as the employer of the employee and used or consumed
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 fringe benefit group of companies lease 2004 No 35 s CX 20 Section CX 23(1)(a) amended 21 December 2010 section 34 Taxation (GST and Remedial Matters) Act 2010 Section CX 23(1)(b) amended 21 December 2010 section 34 Taxation (GST and Remedial Matters) Act 2010
CX 24: 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 managing risks to health and safety in the workplace as provided under the Health and Safety at Work Act 2015
c: would be excluded by section CX 23 employee employer employment fringe benefit 2004 No 35 s CX 20B Section CX 24(b) replaced 4 April 2016 section 232 Health and Safety at Work Act 2015
CX 25: 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 is more than the lesser for the tax year of—
a: 5% of the employee's salary or wages:
b: $1,200. Meaning of short-term charge facilities
3: For the purposes of the FBT rules, a short-term charge facility
a: enables an employee to obtain goods or services that have no connection with the employer or its operations by—
i: buying or hiring the goods or services:
ii: charging the cost of the goods or services to an account:
iii: providing consideration other than money for the goods or services; and
b: requires the employer to provide some or all of the payment or other consideration for the goods or services; and
c: is not a fringe benefit under section CX 10 business charitable organisation employee employer employment fringe benefit pay salary or wages short-term charge facility tax year 2004 No 35 s CX 21 Section CX 25(2) replaced 1 April 2014 section 21(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CX 25(3)(a) replaced 1 April 2014 section 21(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CX 25(3)(b) replaced 1 April 2014 section 21(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CX 25 employer inserted 1 April 2014 section 21(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CX 25 salary or wages inserted 1 April 2014 section 21(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CX 25 tax year inserted 1 April 2014 section 21(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CX 26: Non-liable payments
Employees’ PAYE income payments
1: 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 pay-as-you-earn (PAYE) income payments, all of which are not liable for income tax. Benefit provided during time spent in New Zealand
2: Despite subsection (1), some or all of a benefit received by an employee who is not resident in New Zealand but derives a PAYE income payment that is taxable in New Zealand is a fringe benefit only to the extent to which the benefit relates to time spent by the employee in New Zealand. employee fringe benefit income tax income year New Zealand PAYE income payment quarter 2004 No 35 s CX 22 Section CX 26(1) heading inserted 1 April 2024 section 28(1)(a) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 26(2) heading inserted 1 April 2024 section 28(1)(b) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 26(2) inserted 1 April 2024 section 28(1)(b) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 26 list of defined terms New Zealand inserted 1 April 2024 section 28(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 26 list of defined terms resident inserted 1 April 2024 section 28(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CX 27: Assistance with tax returns
Not fringe benefit
1: An employer’s assistance with the preparation of an employee’s return of income section DB 3 Employees’ returns of income
2: For the purposes of this section, an employee’s return of income includes the income information held by the Commissioner and set out in the employee’s pre-populated account referred to in section 22D(5) deduction employee employer fringe benefit return of income 2004 No 35 s CX 23 Section CX 27(1) heading inserted 1 April 2019 section 144(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CX 27(1) amended 1 April 2019 section 144(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CX 27(2) heading inserted 1 April 2019 section 144(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CX 27(2) inserted 1 April 2019 section 144(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CX 27 list of defined terms income statement repealed 1 April 2019 section 144(4) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
CX 28: 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 Section CX 28 substituted 6 October 2009 section 54(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CX 29: 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 2004 No 35 s CX 25
CX 30: 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 2004 No 35 s CX 26
CX 31: 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 pay 2004 No 35 s CX 26B
CX 32: 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 2004 No 35 s CX 27
CX 33: Goods provided at discount by third parties
When this section applies
1: This section applies when 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 2004 No 35 s CX 27B
CX 33B: Benefits for members of Parliament
Reasonable estimates may be used to determine, for the purposes of the FBT rules, what benefit provided under the Members of Parliament (Remuneration and Services) Act 2013 FBT rules fringe benefit Section CX 33B inserted 17 July 2013 section 22 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CX 33B amended 16 December 2013 section 66 Members of Parliament (Remuneration and Services) Act 2013 Definitions
CX 34: 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 request 2004 No 35 s CX 28 Section CX 34 list of defined terms request inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
CX 35: 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 an exempt ESS
c: to an employer and an employee who are associated persons. associated person company dividend employee employee share loan employer exempt ESS pay qualifying company share 2004 No 35 s CX 29 Section CX 35(2)(b) amended 31 March 2023 section 29(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 35 list of defined terms exempt ESS inserted 31 March 2023 section 29(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CX 36: 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 2004 No 35 s CX 30
CX 37: Meaning of unclassified benefit
Unclassified benefit
a: not a benefit referred to in any of sections CX 6 to CX 16
b: not a benefit excluded under this subpart. employee employer employment fringe benefit unclassified benefit 2004 No 35 s CX 31
CX 38: 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: car
2: Subsection (1) does not apply to a car. 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 car employee employer employment motor vehicle work-related vehicle 2004 No 35 s CX 32 Insurance
CX 39: Life insurers and fully reinsured persons
Section CX 39 repealed 1 July 2010 section 55(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CX 40: 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 2004 No 35 s CX 34
CX 41: 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 any of section YD 4(7) or (10) to (12) amount business excluded income general insurance income insurance contract New Zealand pay resident in New Zealand 2004 No 35 s CX 35 Petroleum mining
CX 42: 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 excluded income share 2004 No 35 s CX 36
CX 43: Farm-out arrangements for mining operations
Farm-in expenditure under a farm-out arrangement is excluded income of a petroleum miner or a mineral miner, as applicable, who is the farm-out party in the farm-out arrangement. excluded income farm-in expenditure farm-out arrangement mineral miner petroleum miner Section CX 43 replaced 1 April 2014 section 21(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Mineral mining Heading repealed 1 April 2014 section 22 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CX 44: Disposal of mining shares
Section CX 44 repealed 1 April 2014 section 22 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CX 45: Disposal of mining shares acquired with reinvestment profit
Section CX 45 repealed 1 April 2014 section 23 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CX 46: Repayment of loans made from reinvestment profit
Section CX 46 repealed 1 April 2014 section 24 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Government grants
CX 47: Government grants to businesses
When this section applies
1: This section applies when—
a: a local authority , a public authority, or a public purpose Crown-controlled company
b: the payment—
i: is in the nature of a grant or subsidy to the person; or
ii: is a grant-related suspensory loan to the person; and
c: the payment is not in the nature of an advance or loan other than a grant-related suspensory loan; and
d: the payment corresponds 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 would have an amount of depreciation loss in the absence of section DF 1 Excluded income
2: The payment is excluded income of the person. Exclusions
3: This section does not apply to a grant made under the Agriculture Recovery Programme for the Lower North Island and Eastern Bay of Plenty, to the extent to which the grant relates to expenditure—
a: incurred by the recipient before the grant; and
b: for which the recipient would be allowed a deduction in the absence of section DF 1 Further exclusion
4: A person may choose that this section not apply to a payment under a grant to the extent to which—
a: the grant is made to the person for the person's business as a research and development growth grant
b: the payment is withheld until the conditions of the grant are satisfied; and
c: in the absence of section DF 1
i: a deduction for expenditure to which the payment corresponds:
ii: depreciation loss resulting from expenditure to which the payment corresponds. Another exclusion
5: This section does not apply to an RDTI transition support payment. amount business deduction depreciation loss excluded income grant-related suspensory loan local authority pay public authority public purpose Crown-controlled company 2004 No 35 s CX 41 Section CX 47(1)(a) substituted 21 December 2010 section 35(1) Taxation (GST and Remedial Matters) Act 2010 Section CX 47(1)(a) amended 31 March 2023 section 30(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 47(1)(b) substituted 21 December 2010 section 35(1) Taxation (GST and Remedial Matters) Act 2010 Section CX 47(1)(c) substituted 21 December 2010 section 35(1) Taxation (GST and Remedial Matters) Act 2010 Section CX 47(1)(d) substituted 21 December 2010 section 35(1) Taxation (GST and Remedial Matters) Act 2010 Section CX 47(3) heading substituted 6 October 2009 section 56(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 47(3) substituted 6 October 2009 section 56(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 47(4) heading added 21 December 2010 section 35(2) Taxation (GST and Remedial Matters) Act 2010 Section CX 47(4) added 21 December 2010 section 35(2) Taxation (GST and Remedial Matters) Act 2010 Section CX 47(4)(a) amended 30 March 2017 section 39 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 47(5) heading inserted 30 March 2022 section 60(1) section 60(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CX 47(5) inserted 30 March 2022 section 60(1) section 60(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section CX 47 list of defined terms large budget screen production grant repealed 6 October 2009 section 52(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 47 list of defined terms public purpose Crown-controlled company inserted 31 March 2023 section 30(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CX 48: Amounts remitted as condition of new start grant
Section CX 48 repealed 24 February 2016 section 87 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CX 48B: Issue of post-1989 forest land units
Section CX 48B repealed 6 October 2009 section 58 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Government funding of film and television Heading inserted 6 October 2009 section 59 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CX 48C: Government funding additional to government screen production payments
When this section applies
1: This section applies when a public authority makes a payment to a person for a project if—
a: the payment is not in the nature of a grant or subsidy; and
b: the payment is not a grant-related suspensory loan; and
c: the person receives a government screen production payment for the project in addition to the payment. Excluded income
2: The payment is excluded income of the person. excluded income government screen production payment grant-related suspensory loan pay public authority Section CX 48C inserted 6 October 2009 section 59 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Research and development Heading repealed 30 March 2017 section 40(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CX 48D: Tax credits for expenditure on research and development
Section CX 48D repealed 30 March 2017 section 40(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Superannuation and savings
CX 49: 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 2004 No 35 s CX 42
CX 50: Tax credits for KiwiSaver and complying superannuation funds
An amount paid as a tax credit under subpart MK amount Commissioner excluded income pay tax credit 2004 No 35 s CP 1
CX 50B: Contributions to retirement savings schemes
Excluded income
1: A retirement scheme contribution is excluded income of a person if they are—
a: the person for whose benefit the contribution is made to the extent to which the contribution is an amount of—
i: money:
ii: an imputation credit or a Maori authority credit that is used to meet the liability of the retirement scheme contributor for RSCT on the contribution:
b: the retirement savings scheme. Exclusions
2: Subsection (1)(a) does not apply if the person for whose benefit the contribution is made—
a: is non-resident, and the contribution is non-resident passive income:
b: supplies to the retirement scheme contributor or the retirement savings scheme, a tax rate applying to the amount of tax withheld that is less than the retirement scheme prescribed rate for the person:
c: includes the amount of the contribution in a return of income for the income year in which the contribution is made. excluded income income year non-resident non-resident passive income retirement savings scheme retirement scheme contribution retirement scheme contributor retirement scheme prescribed rate return of income 2004 No 35 s CX 42B Section CX 50B inserted 1 April 2008 section 334 Taxation (Business Taxation and Remedial Matters) Act 2007 Farming, forestry, or fishing
CX 51: Income equalisation schemes
A refund under section EH 8 EH 68 excluded income 2004 No 35 s CX 43 Section CX 51 amended 18 March 2019 section 145(1) section 145(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Emissions units under Climate Change Response Act 2002 Heading inserted 6 October 2009 section 61 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CX 51B: Disposal of pre-1990 forest land emissions units
Who this section applies to
1: This section applies to a person who disposes of a pre-1990 forest land emissions 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 emissions unit relates. amount emissions unit excluded income income pre-1990 forest land pre-1990 forest land emissions unit surrender Section CX 51B inserted 6 October 2009 section 61 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CX 51C: Disposal of fishing quota emissions units
Who this section applies to
1: This section applies to a person who disposes of a fishing quota emissions 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 of the individual transferable quota to which the emissions unit relates. amount emissions unit excluded income exempt income fishing quota emissions unit Section CX 51C inserted 7 September 2010 section 18 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Environmental restoration
CX 52: Refund from environmental restoration account
A refund to a person under section EK 9 excluded income 2004 No 35 s CX 43B Inflation-indexed instruments
CX 53: 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 2004 No 35 s CX 44 Share-lending arrangements and excepted financial arrangements Heading amended 26 June 2019 section 49 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
CX 54: 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 2004 No 35 s CX 44B
CX 54B: Transfers of emissions units under certain excepted financial arrangements
An amount that relates to the market value of an emissions unit and is derived by a person in a transfer of the emissions unit under an arrangement that is an excepted financial arrangement under section EW 5(11C) amount arrangement emissions unit excepted financial arrangement excluded income Section CX 54B inserted 26 June 2019 section 50 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Portfolio investment income
CX 55: Proceeds from disposal of investment shares
What this section applies to
1: This section applies in an income year to the following entities unless the entity is assured, under an arrangement with another person, of having a gain on the disposal:
a: a portfolio investment entity other than a life fund PIE:
b: the Crown as owner of the New Zealand Superannuation Fund:
bb: a Fund investment entity section HR 4B
bc: a company that is treated as being wholly owned by the Crown under section HR 4B
bd: the Crown as owner of the VCF:
be: a VCF investment vehicle, as referred to in section 25 section HR 4B
c: a life insurer. Excluded income
2: An amount that the entity derives from the disposal in the income year of a share issued by a company referred to in subsection (3) is—
a: excluded income of the entity for the income year, if the entity is described in subsection (1)(a), (b), (bb), or (bc)
b: excluded income of the entity for the income year to the extent to which the amount is actuarially determined to be policyholder base income, if the entity is a life insurer. Particular company
3: The company referred to in subsection (2) is,—
a: at all times in the income year, a company resident in New Zealand and not treated under and for the purposes of a double tax agreement as not resident in New Zealand; or
b: a company that meets the following requirements:
i: a company that, at all times in the income year, is resident in Australia and not treated as resident in a country other than Australia under an agreement between Australia and the other country, that would be a double tax agreement if negotiated between New Zealand and the other country; and
ii: a company that, at the start of the income year or at the time the shares are first acquired in the income year, is included on the official list of ASX Limited, a market licensee under Chapter 7 of the Corporations Act 2001 (Aust)
iii: a company that, at all times in the income year, is required under the Income Tax Assessment Act 1997 (Aust) and the Income Tax Assessment Act 1936 (Aust) to maintain a franking account. Non-participating redeemable shares
4: This section does not apply to—
a: a fixed-rate share, within the meaning of paragraphs (a) to (d) of the definition of that term; or
b: a share for which the amount payable on cancellation is no more than the available subscribed capital per share calculated under the slice rule. actuarially determined amount arrangement available subscribed capital company double tax agreement excluded income fixed-rate share Fund investment entity income income year life fund PIE life insurer pay policyholder base income portfolio investment entity resident in Australia resident in New Zealand share slice rule VCF Section CX 55 substituted 1 April 2010 section 63(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 55(1)(b) replaced 23 October 2015 section 5(1) Taxation (New Zealand Superannuation and Retirement Income) Act 2015 Section CX 55(1)(bb) amended 5 June 2024 section 14(1) New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Act 2024 Section CX 55(1)(bc) inserted 23 October 2015 section 5(1) Taxation (New Zealand Superannuation and Retirement Income) Act 2015 Section CX 55(1)(bd) inserted 14 December 2019 section 17 New Zealand Superannuation and Retirement Income Amendment Act 2019 Section CX 55(1)(be) inserted 14 December 2019 section 17 New Zealand Superannuation and Retirement Income Amendment Act 2019 Section CX 55(2)(a) amended 23 October 2015 section 5(2) Taxation (New Zealand Superannuation and Retirement Income) Act 2015 Section CX 55(3)(b)(ii) amended 1 April 2017 section 9(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CX 55(4) replaced 2 November 2012 section 17(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CX 55 list of defined terms available subscribed capital inserted 2 November 2012 section 17(2)(b) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CX 55 list of defined terms fixed-rate share inserted 2 November 2012 section 17(2)(b) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CX 55 list of defined terms Fund investment entity inserted 5 June 2024 section 14(2) New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Act 2024 Section CX 55 list of defined terms non-participating redeemable share repealed 2 November 2012 section 17(2)(a) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CX 55 list of defined terms pay inserted 2 November 2012 section 17(2)(b) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CX 55 list of defined terms slice rule inserted 2 November 2012 section 17(2)(b) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CX 55 list of defined terms VCF inserted 14 December 2019 section 17 New Zealand Superannuation and Retirement Income Amendment Act 2019
CX 55B: Proceeds from disposal of certain shares and financial arrangements
Disposal of shares
1: An amount that a foreign PIE equivalent derives for an income year from the disposal of a share is excluded income of the foreign PIE equivalent for the income year. Disposal of financial arrangements
2: An amount that a foreign PIE equivalent derives for an income year from the disposal of a financial arrangement is excluded income of the foreign PIE equivalent for the income year. Exclusion
3: Subsection (2) does not apply to an amount of interest referred to in schedule 6 amount excluded income financial arrangement foreign PIE equivalent income year interest share Section CX 55B inserted 29 March 2018 section 39(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CX 56: Attributed income of certain investors in multi-rate PIEs
When this section applies
1: This section applies when an investor in a multi-rate PIE section CP 1
a: the prescribed investor rate for the investor in the relevant calculation period is more than zero; and
b: that rate is not more than the notified investor rate
i: its income tax liability under section HM 47
ii: a voluntary payment under section HM 45 When this section also applies
1B: This section also applies when a foreign investment PIE attributes income to an investor who is, for the calculation period in which the amount is attributed,—
a: a notified foreign investor other than a person referred to in section HM 55D(6)
b: a transitional resident who has chosen a prescribed investor rate referred to in schedule 6
c: a transitional resident when the calculation period falls in the tax year in which the person becomes or ceases to be a transitional resident:
d: an investor in the PIE when the calculation period falls in the tax year in which the person either becomes or ceases to be resident in New Zealand. When this section also applies
1C: When a trustee of a trust is an investor in a multi-rate PIE and an election is made in an income year (the election year section HC 33 When this section does not apply
2: This section does not apply when—
a: the PIE calculates its income tax liability using the quarterly calculation option under section HM 43 section HM 61
b: an amount of attributed PIE income is derived by a trustee who has chosen a prescribed investor rate referred to in schedule 6 as applicable:
c: a person to whom section HM 57B
d: When this section also does not apply
2B: This section also does not apply for the purposes of an adjustment under section HM 36B
a: is an investor in a multi-rate PIE; and
b: derives attributed PIE income from the PIE for an income year; and
c: has a rate of tax applied to their attributed PIE income that is not equal to their prescribed investor rate for the income year; and
d: has an amount of PIE schedular income for the income year. Excluded income
3: The amount is excluded income of the investor. amount attribution period calculation period excluded income foreign investment PIE income income tax liability income year investor multi-rate PIE natural person notified foreign investor notified investor rate pay PIE PIE schedular income prescribed investor rate quarter resident in New Zealand tax year transitional resident Section CX 56 substituted 1 April 2010 section 65(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 56(1) amended 30 March 2021 section 22(1) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CX 56(1) amended 1 April 2020 section 103(1) section 103(5) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CX 56(1)(b) amended 1 October 2010 section 5(1) Taxation (Budget Measures) Act 2010 Section CX 56(1B) heading inserted 29 August 2011 section 9(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56(1B) inserted 29 August 2011 section 9(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56(1C) heading inserted 1 April 2020 section 103(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CX 56(1C) inserted 1 April 2020 section 103(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CX 56(2)(b) amended 1 April 2012 section 9(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56(2)(b) amended 29 August 2011 section 9(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56(2)(b) amended 1 April 2010 section 8(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section CX 56(2)(c) inserted 1 April 2012 section 9(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56(2)(d) repealed 30 March 2021 section 22(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CX 56(2B) heading inserted 30 March 2021 section 22(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CX 56(2B) inserted 30 March 2021 section 22(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CX 56 list of defined terms foreign investment PIE inserted 29 August 2011 section 9(4) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56 list of defined terms natural person inserted 1 April 2020 section 103(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CX 56 list of defined terms notified foreign investor inserted 29 August 2011 section 9(4) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56 list of defined terms notified investor rate inserted 1 October 2010 section 5(2) Taxation (Budget Measures) Act 2010 Section CX 56 list of defined terms PIE schedular income inserted 1 April 2020 section 103(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CX 56 list of defined terms resident in New Zealand inserted 29 August 2011 section 9(4) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56 list of defined terms tax year inserted 29 August 2011 section 9(4) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56 list of defined terms transitional resident inserted 29 August 2011 section 9(4) Taxation (Tax Administration and Remedial Matters) Act 2011
CX 56B: Distributions to investors in multi-rate PIEs
Excluded income
1: An amount of income derived by an investor in a multi-rate PIE as a distribution of or dividend of the PIE is excluded income of the investor. Treatment as non-resident passive income
2: Despite subsection (1), an amount paid by a foreign investment PIE to a notified foreign investor in the PIE is not excluded income under this section to the extent to which it is treated under section HM 44B amount dividend excluded income foreign investment PIE income investor multi-rate PIE non-resident passive income notified foreign investor Section CX 56B inserted 1 April 2010 section 65(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 56B(1) heading inserted 29 August 2011 section 10(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56B(2) heading inserted 29 August 2011 section 10(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56B(2) inserted 29 August 2011 section 10(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56B list of defined terms foreign investment PIE inserted 29 August 2011 section 10(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56B list of defined terms non-resident passive income inserted 29 August 2011 section 10(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section CX 56B list of defined terms notified foreign investor inserted 29 August 2011 section 10(3) Taxation (Tax Administration and Remedial Matters) Act 2011
CX 56C: Distributions to investors by listed PIEs
Resident investors
1: If an investor in a listed PIE derives an amount in an income year as a distribution by or dividend of the PIE, the amount is excluded income of the investor if they—
a: are resident in New Zealand
b: are a natural person or a trustee; and
c: do not include the amount as income in a return of income for the income year. Imputed dividends
2: If subsection (1)(a) to (c) does not apply to the investor, the amount is excluded income to the extent to which the amount of the distribution or dividend is more than the amount that is fully credited as described in section CD 43(26) amount dividend excluded income income year investor listed PIE PIE resident in New Zealand return of income trustee Section CX 56C inserted 1 April 2010 section 65(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 56C(1)(a) amended 24 February 2016 section 88(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CX 56C list of defined terms resident repealed 24 February 2016 section 88(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section CX 56C list of defined terms resident in New Zealand inserted 24 February 2016 section 88(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CX 57: Credits for investment fees
When this section applies
1: This section applies when—
a: a multi-rate PIE includes a credit for fees in the calculation of its tax liability under section HM 47
b: an amount of the credit is attributed to the investor as a member of the class. Excluded income
2: The amount allocated is excluded income of the investor. amount excluded income investor investor class multi-rate PIE PIE Section CX 57 substituted 1 April 2010 section 66(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Foreign investment income Heading inserted 29 March 2018 section 40 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CX 57B: Amounts derived during periods covered by calculation methods
When this section applies
1: This section applies when a person derives an amount , that is not or a dividend to which section CD 36(4) section EX 59(1) Excluded income
2: The amount derived is excluded income of the person. amount attributing interest calculation method excluded income FIF FIF income FIF loss Section CX 57B inserted 29 March 2018 section 40 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CX 57B(1) amended 1 April 2023 section 31(a) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CX 57B(1) amended 1 April 2023 section 31(b) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Minors’ beneficiary income
CX 58: Amounts derived by minors from trusts
To the extent to which section HC 35 amount beneficiary income excluded income minor 2004 No 35 ss HH 3A–3F Certain amounts from trusts Heading inserted 1 April 2024 section 27(1) section 27(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CX 58B: Amounts derived by certain close companies from trusts
To the extent to which section HC 38 amount beneficiary income close company excluded income Section CX 58B inserted 1 April 2024 section 27(1) section 27(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CX 59: Taxable distributions from non-complying trusts
An amount that a person derives in an income year as a taxable distribution from a non-complying trust under section HC 19 amount exempt income income year non-complying trust taxable distribution 2004 No 35 s HH 3(4) Transactions between companies in consolidated groups
CX 60: Intra-group transactions
When this section applies
1: This section applies when a company that is part of a consolidated group derives an amount referred to in section FM 8 Excluded income
1B: Excluded income
2: The amount, except to the extent to which it is described in section FM 8(3) amount company consolidated group excluded income income 2004 No 35 s HB 2(1)(a) Section CX 60(1) replaced 1 April 2019 section 41(1) section 41(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CX 60(1) amended 30 March 2021 section 23(1) section 23(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CX 60(1B) heading repealed 30 March 2021 section 23(2) section 23(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CX 60(1B) repealed 30 March 2021 section 23(2) section 23(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CX 60(2) replaced 26 June 2019 section 52(1) section 52(2) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section CX 60(2) amended 30 March 2021 section 23(3) section 23(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Avoidance arrangements
CX 61: Avoidance arrangements
An amount is excluded income if it is treated as excluded income under—
a: section GA 1
b: section GB 23 amount excluded income 2004 No 35 ss GB 1(1)–(2C) GD 3(1), (2) Partners and partnerships Heading added 1 April 2008 section 9(1) Taxation (Limited Partnerships) Act 2008
CX 62: Amounts of excluded income for partners
A person who is a partner has an amount of excluded income to the extent to which an amount of excluded income results from the application of subpart HG amount excluded income partner partnership Section CX 62 added 1 April 2008 section 9(1) Taxation (Limited Partnerships) Act 2008 Look-through companies Heading added 1 April 2011 section 36 Taxation (GST and Remedial Matters) Act 2010
CX 63: Dividends derived after company ceased to be look-through company
Dividends
1: A dividend derived by a person from a company after it has ceased to be a look-through company is excluded income of the person to the extent to which it is equal to or less than the amount given by subsection (2). Excluded income formula
2: For the purposes of subsection (1), the amount is calculated using the following formula: exit dividends − dividends after look-through. Definition of items in formula
3: The items in the formula are defined in subsections (4) and (5). Exit dividends
4: Exit dividends
a: disposed of all of its property, other than cash, to an unrelated person at market value for cash; and
b: met all its liabilities at market value, excluding income tax payable through disposing of the property or meeting the liabilities; and
c: were liquidated, with the amount of cash remaining being distributed to its shareholders without imputation credits Dividends after look-through
5: Dividends after look-through amount company dispose dividend excluded income imputation credit income tax liquidation look-through company shareholder Section CX 63 added 1 April 2011 section 36 Taxation (GST and Remedial Matters) Act 2010 Section CX 63(4)(c) amended 1 April 2017 section 41(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CX 63 list of defined terms FDP credit repealed 1 April 2017 section 41(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CX 63B: Amounts of excluded income for owners
A person who has an effective look-through interest for a look-through company has an amount of excluded income to the extent to which an amount of excluded income results from the application of subpart HB amount effective look-through interest excluded income look-through company Section CX 63B inserted 29 March 2025 section 33(1) section 33(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Financial instruments and hybrid mismatches Heading inserted 1 July 2018 section 8(1) section 8(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018
CX 64: Income from financial instrument
An amount is excluded income if it is treated as excluded income under subpart FH amount excluded income Section CX 64 inserted 1 July 2018 section 8(1) section 8(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Tax credits paid in cash Heading inserted 29 March 2025 section 34(1) section 34(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CX 65: Tax credits paid in cash
An amount paid as a tax credit under Part M amount excluded income tax credit Section CX 65 inserted 29 March 2025 section 34(1) section 34(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CZ: Terminating provisions
Contents
CZ 1: Grandparented shares under employee share schemes
When this section applies
1: This section applies when, for shares under an employee share scheme,—
a: the shares were granted or acquired under the employee share scheme before the date that is 6 months after the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
i: the shares were granted or acquired for purposes not including the purpose of avoiding the future application of the employee share scheme provisions in that Act (the new ESS provisions
ii: the share scheme taxing date for the shares is before 1 April 2022:
b: the shares were granted or acquired under the employee share scheme before 12 May 2016. Grandparenting
2: The new ESS provisions do not apply for the shares. Instead, the provisions of this Act that would apply ignoring the enactment of the new ESS provisions apply for the shares. employee share scheme income share share scheme taxing date Section CZ 1 replaced 29 September 2018 section 42 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
CZ 2: Mining company’s 1970–71 tax year
Section CZ 2 repealed 1 April 2014 section 25 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
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 income loan money lent New Zealand pay 2004 No 35 s CZ 3
CZ 4: Mineral mining: company making loan before 1 April 1979
Section CZ 4 repealed 1 April 2014 section 26 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
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 apply arrangement debenture exempt income income tax interest local authority money lent New Zealand non-resident pay public authority 2004 No 35 s CZ 5 Section CZ 5 list of defined terms apply inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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. amount commercial bill income relationship agreement 2004 No 35 s CZ 6
CZ 7: Primary producer co-operative companies: 1987–88 income year
Income: disposal
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 for the 1987–88 income year or an earlier income year, the company is treated as deriving income in the income year of disposal of an amount equal to the lesser of—
a: the total of all deductions relating to the asset that were allowed under section 200; and
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 for the 1987–88 income year or an earlier income year, and a payment has been made to a shareholder of the company either on the surrender of any of their shares or on the liquidation of the company, part of the payment is treated as income of the shareholder. The part that is income is determined under subsection (3). 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); and
b: could qualify for a deduction under section 200(4) section 200 amount available subscribed capital income income year liquidation pay primary producer co-operative company section 200 share shareholder slice rule 2004 No 35 s CZ 7 Section CZ 7(1) heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 excess expenditure excluded income farm-out arrangement transferor 2004 No 35 s CZ 8
CZ 9: Available capital distribution amount: 1965 and 1985–1992
Section CD 44(7)(e)
1: For the purposes of section CD 44(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 that provision was repealed
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; or
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; or
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 CD 44(14)(b)
2: For the purposes of section CD 44(14)(b)
a: the amount has been excluded by section 4(3) of the Land and Income Tax Act 1954 from treatment as a dividend; or
b: the issue has been excluded by section 3(3) of the Income Tax Act 1976 from treatment as a bonus issue. amount bonus issue company dividend trading stock 2004 No 35 s CZ 9 Section CZ 9(1)(a) amended 29 March 2018 section 43 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section CZ 9(1)(a) amended 30 March 2017 section 42 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CZ 9B: Available capital distribution amount: 1988 to 2010
Section CZ 9B repealed 30 March 2017 section 43 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CZ 10: Transitional relief for calculation of attributed repatriation dividends: 2 July 1992
Section CZ 10 repealed 24 February 2016 section 89 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 44 to EE 52 and EZ 20
3: Sections EE 44 to EE 52 Section EZ 20 adjusted tax value amount income 2004 No 35 s CZ 11
CZ 12: 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 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 2004 No 35 s CZ 12
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 YA 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 2004 No 35 s CZ 13
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 22(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 22(4)
a: subsection (2) does not apply to the interest:
b: section CD 22(2) dividend group investment fund interest superannuation fund trustee 2004 No 35 s CZ 14
CZ 15: Accident insurance contracts before 1 July 2000
A premium or contribution referred to in section CX 16(2)
a: a premium or contribution paid for an accident insurance contract, as defined in section 13 of the Accident Insurance Act 1998, that was in force before 1 July 2000; or
b: a premium or contribution paid for a contract to which section 188(1)(a) of that Act applied, to the extent to which it related to cover and entitlements for work-related personal injury, that was in force before 1 July 2000. contribution pay 2004 No 35 s CZ 15
CZ 16: Interest payable to exiting company: 2001
Interest payable under schedule 4, clause 12 of the Dairy Industry Restructuring Act 2001 exempt income interest pay 2004 No 35 s CZ 16
CZ 17: Dividend of exiting company: 2001
If an exiting company, as defined in section 5 schedule 4 of the Act dividend exempt income 2004 No 35 s CZ 17
CZ 18: Benefit provider approved within 6 months of 25 November 2003
When this section applies
1: This section applies when a person (the 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 (the 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: in 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:
ii: a member of the provider:
iii: a member of an organisation that directly or indirectly controls the provider:
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 2004 No 35 s CZ 18
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 41 CW 42
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 2004 No 35 s CZ 19
CZ 20: Disposal of personal property lease asset under specified lease
When this section applies
1: This section applies for the purposes of section FZ 2 Income of lessor: when lease ends before term
2: The amount of the excess described in section FZ 2(5)(c) Income of lessor: when lease ends
3: The amount of the excess described in section FZ 2(7) Income of lessee
4: The amount of the excess described in section FZ 2(8) amount income year lessee lessor personal property lease asset specified lease term of the lease 2004 No 35 s FC 6(7), (8)
CZ 21: Superannuation fund loans made to members before 1 April 1989
When this section applies
1: This section applies for the purposes of section CS 18
a: it was made before 1 April 1989; and
b: the rate of interest payable on the loan cannot be reviewed. Prescribed rate of interest varied
2: The prescribed rate of interest is treated as being—
a: the non-concessionary rate of interest for the tax year in which the loan agreement was signed or, if not in writing, agreed to by all parties, in the case of a loan made before 1 April 1985:
b: the prescribed rate of interest for the quarter in which the loan agreement was signed or, if not in writing, agreed to by all parties, in any other case. interest member non-concessionary rate of interest pay prescribed rate of interest quarter superannuation fund tax year 2004 No 35 s GD 6(3)
CZ 21B: 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 from a foreign superannuation scheme as a withdrawal other than a pension or annuity, or applies for the withdrawal of such an amount, in the period beginning on 1 January 2000 and ending with 31 March 2014; and
b: does not include 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 Amount of income
2: The person is treated as deriving, in the return year, from the omitted withdrawals an amount of assessable income (the withdrawal income Tax on omitted withdrawal
3: The amount of the liability of the person for income tax (the withdrawal tax liability Relationship with law otherwise applicable to withdrawal and interest in scheme
4: This section overrides—
a: section CF 3
b: for omitted withdrawals derived on or before 31 March 2014, the law that would apply in the absence of this section to the withdrawal at the time of the derivation of the withdrawal:
c: the law that would apply in the absence of this section to the person's interest in the foreign superannuation scheme for the period ending by 31 March 2014. assessable income foreign superannuation scheme income tax income tax liability income year return of income terminal tax Section CZ 21B inserted 1 April 2014 section 27 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CZ 22: Geothermal wells between 31 March 2003 and 17 May 2006
When this section applies
1: This section applies to a person’s geothermal well when—
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 income or carrying on a business for the purpose of deriving income:
ii: disposes of the well. Income: using well
2: For a person to whom subsection (1)(b)(i) applies, the person has, for the first income year in which this section applies, an amount of income equal to the total amount of deductions that the person is allowed for the well under section DZ 7 of the Income Tax Act 1994, section DZ 15 section DZ 16 Income: disposing of well
3: For a person to whom subsection (1)(b)(ii) applies, the person has, for the first income year in which this section applies, an amount of income equal to the lesser of—
a: the amount derived from disposing of the well; and
b: the total amount of deductions that the person is allowed for the well under section DZ 7 of the Income Tax Act 1994, section DZ 15 section DZ 16 amount business deduction dispose geothermal energy proving period geothermal well income income year 2004 No 35 s CZ 20
CZ 23: Insurance or compensation for buildings replaced as revenue account property affected by Canterbury earthquakes
Section CZ 23 repealed 2 November 2012 section 18 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
CZ 23: Employee benefits for Canterbury earthquake relief: exempt income
Exempt income
1: Income derived by an employee from an employer is exempt income to the extent given by subsection (2) if the income—
a: would be assessable income in the absence of this section; and
b: is provided by the employer for the purpose of relief of employees from the adverse effects of a Canterbury earthquake, as defined in section 4
c: is derived in the period of 8 weeks beginning on the day of that Canterbury earthquake; and
d: does not replace a PAYE income payment; and
e: does not depend on the seniority of the employee; and
f: is available to another employee, who is not an associated person of the employer and is or was immediately before a Canterbury earthquake in full-time employment with the employer, if the employee is an associated person of the employer; and
g: is treated by the employer as being exempt income for the employee. Extent of exemption
2: Income satisfying subsection (1) is exempt income to the extent that the income is—
a: accommodation
b: less than or equal to $3,200 in total, if the income is in a form other than accommodation. accommodation assessable income employee employer exempt income fringe benefit income Section CZ 23 inserted 24 May 2011 section 4 Taxation (Canterbury Earthquake Measures) Act 2011 Section CZ 23(2)(a) amended 30 June 2014 section 36(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CZ 23 list of defined terms accommodation inserted 30 June 2014 section 36(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CZ 23B: Employee benefits for North Island flooding events: exempt income
Exempt income
1: Income derived by an employee from an employer is exempt income to the extent given by subsection (2) if the income—
a: would be assessable income in the absence of this section; and
b: is provided by the employer for the purpose of relief of employees from the adverse effects of a North Island flooding event; and
c: is derived in the period of 8 weeks beginning on the first day of the relevant North Island flooding event; and
d: does not replace a PAYE income payment; and
e: does not depend on the seniority of the employee; and
f: is available to another employee, who is not an associated person of the employer and is or was immediately before a North Island flooding event in full-time employment with the employer, if the employee is an associated person of the employer; and
g: is treated by the employer as being exempt income for the employee. Extent of exemption
2: Income satisfying subsection (1) is exempt income to the extent to which the income is—
a: accommodation:
b: less than or equal to $5,000 in total, if the income is in a form other than accommodation. accommodation assessable income employee employer exempt income fringe benefit income North Island flooding event Section CZ 23B inserted 31 March 2023 section 32(1) section 32(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CZ 24: Employee benefits for Canterbury earthquake relief: not fringe benefits
When this section applies
1: This section applies when an employee receives from an employer a benefit that—
a: would be a fringe benefit in the absence of this section; and
b: is for the purpose of the relief of employees from the adverse effects of a Canterbury earthquake, as defined in section 4
c: is received in the period of 8 weeks beginning on the day of that Canterbury earthquake; and
d: does not replace a PAYE income payment; and
e: does not depend on the seniority of the employee; and
f: is available to another employee, who is not an associated person of the employer and is or was immediately before a Canterbury earthquake in full-time employment with the employer, if the employee is an associated person of the employer; and
g: is treated by the employer as not being a fringe benefit. Benefits with known value for employee
2: Benefits satisfying subsection (1) that would, in the absence of this section, be fringe benefits having a value for the employee that the employer could estimate, are not fringe benefits to the extent that their total value as fringe benefits for the period would be less than or equal to the amount by which $3,200 exceeds the income that is—
a: exempt income under section CZ 23(2)(b)
b: derived by the employee from the employer in the same period. Benefits with unknown value for employee
3: Benefits satisfying subsection (1) that would, in the absence of this section, be fringe benefits having a value for the employee that the employer could not estimate, are not fringe benefits. associated person employee employer exempt income fringe benefit income PAYE income payment Section CZ 24 added 24 May 2011 section 4 Taxation (Canterbury Earthquake Measures) Act 2011
CZ 24B: Employee benefits for North Island flooding events relief: not fringe benefits
When this section applies
1: This section applies when an employee receives from an employer a benefit that—
a: would be a fringe benefit in the absence of this section; and
b: is for the purpose of the relief of employees from the adverse effects of a North Island flooding event; and
c: is received in the period of 8 weeks beginning on the first day of the relevant North Island flooding event; and
d: does not replace a PAYE income payment; and
e: does not depend on the seniority of the employee; and
f: is available to another employee, who is not an associated person of the employer and is or was immediately before the relevant North Island flooding event in full-time employment with the employer, if the employee is an associated person of the employer; and
g: is treated by the employer as not being a fringe benefit. Benefits with known value for employee
2: Benefits satisfying subsection (1) that would, in the absence of this section, be fringe benefits having a value for the employee that the employer could estimate, are not fringe benefits to the extent to which their total value as fringe benefits for the period would be less than or equal to the amount by which $5,000 exceeds the income that is—
a: exempt under section CZ 23B(2)(b)
b: derived by the employee from the employer in the same period. Benefits without known value for employee
3: Benefits satisfying subsection (1) that would, in the absence of this section, be fringe benefits having a value for the employee that the employer could not estimate, are not fringe benefits. associated person employee employer exempt income fringe benefit income PAYE income payment North Island flooding event Section CZ 24B inserted 31 March 2023 section 33(1) section 33(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
CZ 25: Land and buildings as revenue account property affected by Canterbury earthquakes and replaced—insurance or compensation, Government purchase
When this section applies
1: This section applies for a person and an income year (the current year 2024–25
a: in or before the current year, derives for buildings or land (the affected property
i: insurance or compensation, if a Canterbury earthquake as that term is defined in section 4 demolished
ii: an amount from a purchase by the Crown section 91 103 104
b: in the absence of this section, would have in or before the current year a total amount of income (the insurance income sections CB 6 CB 7 CB 12 CB 13 CG 6 sections DB 23 DB 27
c: plans, in the current year, to acquire property (the replacement property
i: replacing affected property; and
ii: meeting the requirements of subsection (4); and
iii: having a cost exceeding the total amount of deductions under sections DB 23 DB 27
d: notifies Suspended recovery income
2: The amount (the excess recovery suspended recovery income Effect of purchase of replacement property
3: If the person incurs expenditure (the replacement cost
a: for the purposes of determining the value of the replacement property for section EA 2
i: the amount calculated by dividing the replacement cost by the total amount of deductions under sections DB 23 DB 27
ii: the amount of the excess recovery, if the insurance income does not exceed the replacement cost or is less than the amount calculated in subparagraph (i); and
b: the amount of the suspended recovery income immediately before the expenditure is reduced by an amount equal to the reduction of expenditure under paragraph (a) for the purposes of section EA 2 Requirements for replacement property
4: For an item of affected property, replacement property must be a building or land that is revenue account property—
a: acquired in or before the person's 2023–24
b: located in greater Christchurch as that term is defined in section 4 Amount remaining at end of 2023–24
5: The person has an amount of income for the affected property in the current year equal to the amount of suspended recovery income when—
a: the current year ends, if the current year is the 2023–24
b: in the current year, the person decides not to replace the affected property:
c: in the current year, the person goes into liquidation or becomes bankrupt. Notice of election for affected property
6: A person choosing to rely on this section to suspend in a current year the recognition of suspended recovery income from the insurance for affected property must notify
a: by the later of 31 January 2012 and the date on which the return of income is filed for the earliest income year (the estimate year
b: if the current year is after the estimate year,—
i: for each income year between the estimate year and the current year, by the date on which the return of income is filed for that income year; and
ii: for the current year, by the date on which the return of income is filed for the current year. Contents of notice of election
7: A notice under subsection (6) must—
a: describe the affected property; and
b: give details of replacement property acquired in the current year to replace, in full or in part, the affected property; and
c: give the cost of the replacement property and the reduction under subsection (3) of that cost for the purposes of section EA 2
d: give the amount, for the affected property, of the income from insurance or compensation remaining suspended under this section at the end of the current year. Relationship to section CG 6
8: This section overrides section CG 6 amount deduction income income year notice notify return of income Section CZ 25 inserted 2 November 2012 section 19 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CZ 25(1) amended 18 March 2019 section 147(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CZ 25(1) amended 27 February 2014 section 28(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 25(1)(a)(i) amended 27 February 2014 section 28(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 25(1)(a)(ii) amended 2 June 2016 section 10(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CZ 25(1)(a)(ii) amended 27 February 2014 section 28(3) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 25(1)(b) replaced 27 February 2014 section 28(5) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 25(1)(c) replaced 27 February 2014 section 28(6) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 25(1)(d) amended 2 June 2016 section 10(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CZ 25(2) amended 27 February 2014 section 28(7) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 25(3)(a) replaced 27 February 2014 section 28(8) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 25(4)(a) amended 18 March 2019 section 147(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CZ 25(4)(a) amended 27 February 2014 section 28(9) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 25(5) heading amended 18 March 2019 section 147(3)(a) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CZ 25(5) heading amended 27 February 2014 section 28(10) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 25(5)(a) amended 18 March 2019 section 147(3)(b) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section CZ 25(5)(a) amended 27 February 2014 section 28(11) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 25(6) amended 2 June 2016 section 10(3) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CZ 25 list of defined terms notify inserted 2 June 2016 section 10(4) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
CZ 25B: Land and buildings as revenue account property affected by Hurunui/Kaikōura earthquakes and replaced—insurance or compensation
When this section applies
1: This section applies for a person and an income year (the current year
a: in or before the current year, derives for buildings or land (the affected property section 4
b: in the absence of this section, would have in or before the current year a total amount of income (the insurance income sections CB 6 CB 7 CB 12 CB 13 CG 6 sections DB 23 DB 27
c: plans, in the current year, to acquire property (the replacement property
i: replacing affected property; and
ii: meeting the requirements of subsection (4); and
iii: having a cost exceeding the total amount of deductions under sections DB 23 DB 27
d: notifies the Commissioner under subsection (6) in relation to the affected property. Suspended recovery income
2: The amount (the excess recovery suspended recovery income Effect of purchase of replacement property
3: If the person incurs expenditure (the replacement cost
a: for the purposes of determining the value of the replacement property for section EA 2
i: the amount calculated by dividing the replacement cost by the total amount of deductions under sections DB 23 DB 27
ii: the amount of the excess recovery, if the insurance income does not exceed the replacement cost or is less than the amount calculated in subparagraph (i); and
b: the amount of the suspended recovery income immediately before the expenditure is reduced by an amount equal to the reduction of expenditure under paragraph (a) for the purposes of section EA 2 Requirements for replacement property
4: For an item of affected property, replacement property must be a building or land that is revenue account property—
a: acquired in or before the person’s 2023–24 income year; and
b: located in the earthquake-affected area as that term is defined in section 4
i: the Canterbury Regional Council (Environment Canterbury), the Hurunui District Council, the Kaikoura District Council, or the Marlborough District Council, if the affected property is located in an earthquake-affected area relating to 1 of those councils; or
ii: the Wellington City Council, the Hutt City Council, or the Wellington Regional Council (Greater Wellington), if the affected property is located in an earthquake-affected area relating to 1 of those councils. Amount remaining at end of 2023–24 income year or when person changes intentions, is liquidated, or becomes bankrupt
5: The person has an amount of income for the affected property in the current year equal to the amount of suspended recovery income when—
a: the current year ends, if the current year is the 2023–24 income year:
b: in the current year, the person decides not to replace the affected property:
c: in the current year, the person goes into liquidation or becomes bankrupt. Notice of election for affected property
6: A person choosing to rely on this section to suspend in a current year the recognition of suspended recovery income from the insurance for affected property must notify the Commissioner. Contents of notice of election
7: A notice under subsection (6) must—
a: describe the affected property; and
b: give details of replacement property acquired in the current year to replace, in full or in part, the affected property; and
c: give the cost of the replacement property and the reduction under subsection (3) of that cost for the purposes of section EA 2
d: give the amount, for the affected property, of the income from insurance or compensation remaining suspended under this section at the end of the current year. Relationship to section CG 6
8: This section overrides section CG 6 amount deduction income income year notice notify Section CZ 25B inserted 18 March 2019 section 148(1) section 148(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
CZ 25C: Land or buildings as revenue account property affected by North Island flooding events and replaced—insurance or compensation
When this section applies
1: This section applies for a person and an income year (the current year
a: in or before the current year, derives for buildings or land (the affected property section CB 6 CB 7 CB 12 CB 13
b: in the absence of this section, would have, in or before the current year, a total amount of income (the insurance income section CB 6 CB 7 CB 12 CB 13 CG 6 section DB 23
c: plans, in the current year, to acquire property (the replacement property
i: replacing affected property; and
ii: meeting the requirements of subsection (4); and
iii: having a cost exceeding the total amount of deductions under section DB 23
d: notifies the Commissioner under subsection (6) in relation to the affected property. Suspended recovery income
2: The amount (the excess recovery suspended recovery income Effect of purchase of replacement property
3: If the person incurs expenditure (the replacement cost
a: for the purposes of determining the value of the replacement property for section EA 2
i: the amount calculated by dividing the replacement cost by the total amount of deductions under section DB 23
ii: the amount of the excess recovery, if the insurance income does not exceed the replacement cost or is less than the amount calculated in subparagraph (i); and
b: the amount of the suspended recovery income immediately before the expenditure is reduced by an amount equal to the reduction of expenditure under paragraph (a) for the purposes of section EA 2 Requirements for replacement property
4: For an item of affected property, replacement property must be a building or land that is revenue account property—
a: acquired in or before the person’s 2027–28 income year; and
b: located in New Zealand. Amount remaining at end of 2027–28 income year or when person changes intentions, is liquidated, or becomes bankrupt
5: The person has an amount of income for the affected property in the current year equal to the amount of suspended recovery income when—
a: the current year ends, if the current year is the 2027–28 income year:
b: in the current year, the person decides not to replace the affected property:
c: in the current year, the person goes into liquidation or becomes bankrupt. Notice of election for affected property
6: A person choosing to rely on this section to suspend in a current year the recognition of suspended recovery income from the insurance for affected property must notify the Commissioner—
a: by the later of 30 April 2024 and the date on which the return of income is filed for the earliest income year (the estimate year
b: if the current year is after the estimate year,—
i: for each income year between the estimate year and the current year, by the date on which the return of income is filed for that income year; and
ii: for the current year, by the date on which the return of income is filed for the current year. Later deadline for notice of election
7: The Commissioner may allow the person to file the notice under subsection (6) at a later time if the Commissioner considers there are exceptional circumstances. Contents of notice of election
8: A notice under subsection (6) must—
a: describe the affected property; and
b: give details of replacement property acquired in the current year to replace, in full or in part, the affected property; and
c: give the cost of the replacement property and the reduction under subsection (3) of that cost for the purposes of section EA 2
d: give the amount, for the affected property, of the income from insurance or compensation remaining suspended under this section at the end of the current year. Relationship to other sections
9: This section overrides sections CB 6 CB 7 CB 12 CB 13 CG 6 amount Commissioner deduction income income year land liquidation New Zealand North Island flooding events notice notify return of income revenue account property Section CZ 25C inserted 28 March 2024 section 28(1) section 28(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CZ 25D: Improvements to farmland and horticultural plants affected by North Island flooding events and replaced—insurance or compensation
When this section applies
1: This section applies for a person and an income year (the current year
a: in or before the current year, receives an amount of insurance or compensation for improvements to land subject to section DO 4 DO 5 affected property
b: in the absence of this section, would have, in or before the current year, a total amount of income (the insurance income section CG 4
c: has claimed deductions for the affected property under 1 or more of section DO 4 DO 5 DO 11
d: plans, in the current year, to acquire property (the replacement property
i: replacing the affected property; and
ii: meeting the requirements of subsection (5)
e: notifies the Commissioner under subsection (7) in relation to the affected property. Insurance or compensation not income
2: The amount of the insurance or compensation is not income unless subsection (3) or (6) applies. Income where insurance or compensation proceeds exceed replacement cost
3: Where the person incurs expenditure (the replacement cost
a: the amount of the insurance or compensation is income in the current year to the extent to which it exceeds the replacement cost; but
b: the amount of that income is reduced to the extent to which the amount of the insurance or compensation is also greater than the original cost of the affected property. Value of replacement property
4: If the person acquires replacement property, the value attributed to the expenditure to acquire the replacement property for the purposes of section DO 4 DO 5
a: if the insurance income is equal to or greater than the replacement cost, zero:
b: if the insurance income is less than the replacement cost, the extent to which the replacement cost exceeds the insurance income. Requirements for replacement property
5: For an item of affected property, replacement property must be an improvement to farm land as described in schedule 20
a: acquired in or before the person’s 2027–28 income year; and
b: located in New Zealand. Income if replacement property not acquired by end of 2027–28 income year or when person changes intentions, is liquidated, or becomes bankrupt
6: The person has an amount of income for the affected property in the current year equal to the insurance income when—
a: the current year ends, if the current year is the 2027–28 income year:
b: in the current year, the person decides not to replace the affected property:
c: in the current year, the person goes into liquidation or becomes bankrupt. Notice of election for affected property
7: A person choosing to rely on this section to suspend in a current year the recognition of income from the insurance for affected property must notify the Commissioner—
a: by the later of 30 April 2024 and the date on which the return of income is filed for the earliest income year (the estimate year
b: if the current year is after the estimate year,—
i: for each income year between the estimate year and the current year, by the date on which the return of income is filed for that income year; and
ii: for the current year, by the date on which the return of income is filed for the current year. Later deadline for notice of election
8: The Commissioner may allow the person to file the notice under subsection (7) at a later time if the Commissioner considers there are exceptional circumstances. Contents of notice of election
9: A notice under subsection (7) must—
a: describe the affected property; and
b: give details of replacement property acquired in the current year to replace, in full or in part, the affected property; and
c: give the cost of the replacement property and the value attributed to that cost under subsection (4) for the purposes of section DO 4 DO 5
d: give the amount, for the affected property, of the income from insurance or compensation remaining suspended under subsection (2) at the end of the current year. Relationship to section CG 4
10: This section overrides section CG 4 amount Commissioner deduction income income year land liquidation New Zealand North Island flooding events notice notify return of income Section CZ 25D inserted 28 March 2024 section 29(1) section 29(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 25D(1)(d)(ii) amended 29 March 2025 section 35 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CZ 26: Land and buildings affected by Canterbury earthquakes—sections CB 9 to
CB 11 Sections CB 9 to CB 11 CB 14 section 91 103 104 land Section CZ 26 replaced 27 February 2014 section 29(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 26 heading amended 27 February 2014 section 29(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 26 amended 2 June 2016 section 11 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section CZ 26 amended 27 February 2014 section 29(3) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CZ 26B: Land and buildings affected by North Island adverse weather event—sections CB 6A
and CB 9 to CB 11 Sections CB 6A and CB 9 to CB 11 land local authority North Island adverse weather event Section CZ 26B inserted 28 March 2024 section 30(1) section 30(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 26B heading amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 26B amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CZ 27: Prior bad debt deductions clawback
When this section applies
1: This section applies when—
a: a person acquires a debt before the introduction of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill (the introduction day
b: the debt exists on the first day of the 2014–15 income year and a base price adjustment under section EW 31
c: the person has taken, in a return of income, a deduction for the debt under section DB 31 prior bad debt deduction
d: the prior bad debt deduction arose before the introduction day; and
e: the person does not have a dispute with the Commissioner on the introduction day in relation to any prior bad debt deduction for the debt. Income: prior bad debt deductions clawback
2: The person has an amount of income equal to the difference between their total prior bad debt deductions for the debt, and the amount of deductions that they would have had for the debt under section DB 31 section DB 31(3B), (4B) Commissioner deduction income income year return of income Section CZ 27 inserted 27 February 2014 section 30 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section CZ 27(2) amended 24 February 2016 section 90 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CZ 28: Transitional provision for mineral mining: previously appropriated mining expenditure
When this section applies
1: This section applies when—
a: a mineral miner appropriates an amount of income for an income year to mining exploration expenditure or mining development expenditure; and
b: the income year precedes the 2014–15 income year; and
c: the mineral miner has a deduction under section DU 4 section CU 9 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
d: as a result of the application of those sections, the mineral miner has an income tax liability for the 2014–15 income year. Timing
2: The mineral miner may allocate the corresponding amount of income equally to the 2014–15 and 2015–16 income years. amount deduction income income tax liability income year mineral miner mining development expenditure mining exploration expenditure Section CZ 28 inserted 1 April 2014 section 31(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CZ 29: Accommodation expenditure: Canterbury earthquake relief
When this section applies
1: This section applies for the purposes of section CW 16B
a: the employment duties of an employee require them to work on a project of limited duration for rebuilding or recovery, including the repair and reconstruction of land, infrastructure, and other property in greater Christchurch as a result of the Canterbury earthquakes; and
b: the distant workplace is a workplace in greater Christchurch. Exempt income
2: The value provided or expenditure incurred by the employer of the employee for or in relation to the accommodation is exempt income of the employee. Modified definition of project of limited duration
3: Despite paragraph (c)(iii) of the definition of project of limited duration section CW 16C(2)(d)
a: 5 years, if the employee starts work at the distant workplace in the period commencing on 4 September 2010 and ending on 31 March 2015:
b: 4 years, if the employee starts work at the distant workplace in the period commencing on 1 April 2015 and ending on 31 March 2016:
c: 3 years, if the employee starts work at the distant workplace in the period commencing on 1 April 2016 and ending on 31 March 2017:
d: 3 years, if the employee starts work at the distant workplace in the period commencing on 1 April 2017 and ending on 31 March 2018:
e: 3 years, if the employee starts work at the distant workplace in the period commencing on 1 April 2018 and ending on 31 March 2019. Project periods: basis of time limits
4: For the purposes of this section and section CW 16C
a: in subsection (3)(a), the time limit is determined by whether the actual period of continuous work of the employee at the distant workplace is for a period of no more than 5 years:
b: in subsection (3)(b) to (e), the time limits apply based on the employer's expectation of the employee's involvement in the project. Definitions for this section
5: In this section, Canterbury earthquakes greater Christchurch rebuilding recovery section 4 Relationship with section CZ 30
6: Section CZ 30 Related provisions
7: For the purposes of this section, the commencement and application provisions in sections 2 24
a: commencing on 4 September 2010:
b: applying for the person's income year that includes 4 September 2010 and for all later income years. accommodation amount Canterbury earthquakes distant workplace employee employer exempt income greater Christchurch land pay period of continuous work project of limited duration rebuilding recovery Section CZ 29 inserted 30 June 2014 section 37(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CZ 29(3) heading inserted 24 February 2016 section 91 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CZ 29B: Accommodation expenditure: North Island flooding events
When this section applies
1: This section applies for the purposes of section CW 16B
a: the employment duties of an employee require them to work on a project of limited duration for rebuilding or recovery, including the repair and reconstruction of land, infrastructure, and other property in the areas affected by the North Island flooding events; and
b: the distant workplace is a workplace in the areas affected by the North Island flooding events. Exempt income
2: The value provided or expenditure incurred by the employer of the employee for or in relation to the accommodation is exempt income of the employee. Modified definition of project of limited duration
3: Despite paragraph (c)(iii) of the definition of project of limited duration section CW 16C(2)(d) 5 years How time limit determined
3B: For the purposes of this section and section CW 16C Time limit extension
4: Any time limit
a: on the recommendation of the Minister of Revenue; and
b: before the expiry of the relevant time limit Definitions for this section
5: In this section and section FP 22
a: rebuilding
i: extending, repairing, improving, subdividing, or converting any land, infrastructure, or other property; and
ii: rebuilding communities:
b: recovery Relationship with section CZ 30
6: Section CZ 30 Secondary legislation
7: An Order in Council under subsection (4) is secondary legislation ( see Part 3 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. accommodation distant workplace employee employer exempt income land North Island flooding events period of continuous work project of limited duration Section CZ 29B inserted 31 March 2023 section 34 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section CZ 29B(3) amended 28 March 2024 section 31(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 29B(3B) heading inserted 28 March 2024 section 31(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 29B(3B) inserted 28 March 2024 section 31(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 29B(4) amended 28 March 2024 section 31(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 29B(4)(b) amended 28 March 2024 section 31(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 29B(5) amended 1 April 2025 section 36(1) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CZ 29B(7) heading inserted 29 March 2025 section 36(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CZ 29B(7) inserted 29 March 2025 section 36(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section CZ 29B list of defined terms North Island flooding event repealed 28 March 2024 section 31(6) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 29B list of defined terms North Island flooding events inserted 28 March 2024 section 31(6) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 29B list of defined terms period of continuous work inserted 28 March 2024 section 31(5) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section CZ 29B list of defined terms project of limited duration inserted 28 March 2024 section 31(5) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CZ 30: Transitional provision: application of certain accommodation provisions
When this section applies
1: This section applies for the purposes of sections CE 1B CW 16B to CW 16F CW 17CB Transitional period: accommodation
2: Despite the commencement and application provisions in the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Transitional period: work-related meals
3: Despite the commencement and application provisions in the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Basis of time limits for and after transitional period
4: For the purposes of this section and section CW 16C
a: the actual period of continuous work of the employee at the distant workplace; or
b: a time limit based on the employer's expectation of the employee's involvement in an out-of-town secondment or project of limited duration. Related provisions
5: For the purposes of this section, the commencement and application provisions in sections 2 15 24 26
a: commencing on 1 January 2011 for the accommodation provisions, and 1 April 2011 for the work-related meal provisions:
b: applying for the person's income year that includes 1 January 2011 or 1 April 2011, as applicable, and for all later income years. accommodation distant workplace employee employer out-of-town secondment period of continuous work project of limited duration tax tax position Section CZ 30 inserted 30 June 2014 section 38(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CZ 30 list of defined terms tax position inserted 24 February 2016 section 243 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CZ 31: Accommodation expenditure: New Zealand Defence Force
When this section applies
1: This section applies for the period that starts on 6 December 2012 and ends on 31 March 2015 for the purposes of section CE 1(1B)
a: accommodation is provided to a person who is a member of the Defence Force by the Navy, Army, or Air Force, as those terms are defined in the Defence Act 1990
b: the accommodation is provided in relation to the employment or service of the person. Market value
2: The value is an amount equal to the rent paid by the person for the accommodation. accommodation amount employment Section CZ 31 inserted 30 June 2014 section 39 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CZ 32: Treatment of certain petroleum storage facilities
When this section applies
1: This section applies for an income year when a petroleum miner disposes of an underground gas storage facility in relation to which they have been allowed a deduction under section DT 5 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Income
2: Despite section CT 1(2) (past expenditure ÷ total expenditure) × amount on disposal. Definition of items in formula
3: In the formula,—
a: past expenditure section DT 5
b: total expenditure
i: the amount of expenditure that the miner incurs in relation to the storage facility after the date of enactment of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
ii: the amount of past expenditure referred to in paragraph (a):
c: amount on disposal Transitional provision for certain facilities
4: Despite section CT 7(2) amount deduction income year petroleum miner petroleum mining asset petroleum mining permit Section CZ 32 inserted 30 June 2014 section 40 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CZ 33: Transitional exception for accommodation provided to ministers of religion
When this section applies
1: This section applies for the period that starts on 1 July 2013 and ends on 31 March 2015 when accommodation is provided to a person who is a minister of religion and the property in which the accommodation is provided is supplied by the religious society or organisation of which they are a minister. Income
2: Despite section CE 1 Limited amount
3: The amount of income for an income year is calculated using the formula— remuneration × (1 − adjustment). Definition of items in formula
4: In the formula,—
a: remuneration
b: adjustment Calculation of remuneration for purposes of section
5: For the purposes of subsection (4)(a), the calculation of the amount of the item remuneration Adjustments
6: An adjustment referred to in subsection (4)(b) is as follows:
a: if the person to whom the accommodation is provided uses part of the accommodation wholly or mainly for work purposes related to their duties as a minister, the amount is apportioned between that business use and private use:
b: if more than 1 person referred to in subsection (1) shares in the accommodation provided, the amount is apportioned equally between them. Part years
7: For the purposes of this section, if accommodation is provided for part of an income year, the references to income year are read as references to the relevant parts of the income year. Meaning of minister of religion
8: For the purposes of this section, minister of religion
a: means a person—
i: who is ordained, commissioned, appointed, or otherwise holds an office or position, regardless of their title or designation, as a minister of a religious denomination or community that meets the charitable purpose of the advancement of religion; and
ii: whose duties are related mainly to the practice, study, teaching, or advancement of religious beliefs; and
iii: whose accommodation is used as an integral part of performing their duties; and
b: does not include a member of a religious society or order referred to in section CW 25 accommodation amount business income income year minister of religion Section CZ 33 inserted 24 February 2016 section 92 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CZ 34: Income arising from tax accounting provision for aircraft engine overhauls
Income arising for a person under section DZ 23(2)(b) Section CZ 34 inserted 1 April 2017 section 44 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CZ 35: Treatment of backdated payments for social rehabilitation: 2008–09 to 2017–18 income years
Section CZ 35 repealed 26 June 2019 section 53 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
CZ 35: Amounts derived by Te Kōwhatu Tū Moana
Exempt income
1: Income derived by Te Kōwhatu Tū Moana (the trust Meaning
2: In this section, Te Kōwhatu Tū Moana section 4 beneficiary exempt income income Te Kōwhatu Tū Moana trustee Section CZ 35 inserted 17 March 2019 section 65(2) New Plymouth District Council (Waitara Lands) Act 2018 Section CZ 35 list of defined terms Te Kōwhatu Tū Moana inserted 23 March 2020 section 104(a) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CZ 35 list of defined terms month repealed 23 March 2020 section 104(b) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CZ 36: Treatment of backdated payments for social rehabilitation: 2008–09 to 2017–18 income years
When this section applies
1: This section applies for income years from the 2008–09 income year to the 2017–18 income year when—
a: a person is paid an amount as a personal service rehabilitation payment; and
b: the person pays an amount to another person for providing them with a key aspect of social rehabilitation, referred to in the definition of personal service rehabilitation payment
c: the payment referred to in paragraph (a) that is paid in relation to the service referred to in paragraph (b) is made in an income year that is later than the income year in which the service is provided to the person. Treatment of payment
2: If the Commissioner is satisfied that the tax obligations relating to the personal service rehabilitation payment have been met, the payment is treated as exempt income for the income year in which the person derives the payment. amount Commissioner exempt income income year pay personal service rehabilitation payment Section CZ 36 inserted 26 June 2019 section 54 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
CZ 37: Income equalisation schemes
Income
1: A refund made to a person under section EZ 80 section EZ 4B or FP 23 EZ 81 section EZ 4B or FP 23 section EH 6 EH 40 Excluded income
2: A refund under section EZ 80 EZ 81 section EH 6 EH 40 excluded income income income year interest pay Section CZ 37 inserted 30 March 2021 section 24(1) section 24(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section CZ 37(1) amended 1 April 2025 section 37 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
CZ 38: Disposals of trading stock to non-associates without business purpose
Section CZ 38 repealed 1 April 2024 section 32 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CZ 39: Disposal within 5 years: bright-line test for residential land: acquisition on or after 29 March 2018
Section CZ 39 repealed 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CZ 40: Main home exclusion for bright-line: acquisition on or after 29 March 2018
Section CZ 40 repealed 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
CZ 41: Distributions to supplying shareholders of Fonterra: 2022–23 to 2024–25 income years
What this section applies to
1: This section applies to a distribution by Fonterra to a supplying shareholder if the distribution is made for Fonterra’s 2022–23, 2023–24, or 2024–25 income year. Treatment of distribution
2: The distribution is not a dividend to the extent to which the distribution is for the supplying shareholder’s—
a: transaction shares:
b: projected transactions shareholding:
c: qualifying non-transaction shares:
d: projected qualifying non-transaction shareholding. Companies Act 1993
3: The 20-working-day rule for fixing a date in section 125(2) Some definitions
4: In this section,— Fonterra projected qualifying non-transaction shareholding projected transactions shareholding qualifying non-transaction shares
a: that are not transaction shares and are not their projected transactions shareholding; but
b: not including any shares in Fonterra that the supplying shareholder holds described in paragraph (a) section 125 supplying shareholder section 34 trading transactions
a: the disposal and acquisition of trading stock of the vendor that is not intangible property; and
b: not subject to section CB 2 transaction shares dividend Fonterra income year projected qualifying non-transaction shareholding projected transactions shareholding qualifying non-transaction shares share supplying shareholder trading stock trading transactions transaction shares Section CZ 41 inserted 28 March 2024 section 34 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
D: Deductions
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 Avoidance arrangements
3: Section GB 33 amount assessable income business deduction depreciation loss excluded income general permission loss 2004 No 35 s DA 1
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 non-resident passive income of the kind referred to in section RF 2(3) 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 withholding tax limitation 2004 No 35 s DA 2
DA 3: Effect of specific rules on general rules
Supplements to general permission
1: A provision in any of subparts DB to DZ Express reference needed to supplement
2: A provision in any of subparts DB to 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 to DZ Relationship between other specific provisions and general permission or general limitations
4: A provision in any of subparts DB to DZ Express reference needed to override
5: A provision in any of subparts DB to DZ
a: it overrides the general permission or the relevant limitation; or
b: the general permission or the relevant limitation does not apply. Part E
6: No provision in Part E deduction general limitation general permission supplement 2004 No 35 s DA 3
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 2004 No 35 s DA 4
DA 5: Treatment of expenditure for commercial fit-out
Section DA 5 repealed 24 February 2016 section 93(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DB: Specific rules for expenditure types
Contents
Taxes and other amounts Heading substituted 29 August 2011 section 12 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:
b: a tax imposed in a country or territory outside New Zealand that is 1 or more of the following:
i: substantially the same as income tax:
ii: based on Articles 2.1 to 2.3 of the global anti-base erosion model rules:
iii: based on Articles 2.4 to 2.6 of those model rules:
iv: a qualified domestic minimum top-up tax, as defined in Article 10.1.1 of those model rules:
v: substantially the same as the tax that will be imposed by this Act—
A: when all the provisions of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 amendment Act section 2(31) and (33)
B: because of the application of the modifications to Article 2.1 of the global anti-base erosion model rules made by section 123(3)
bb: an amount withheld under section 1471 or 1472 of the Internal Revenue Code of 1986 (USA), as amended from time to time:
c: ancillary tax, unless listed in subsection (2):
d: a civil penalty under Part 9
e: 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 Some ancillary tax excluded
2: Subsection (1) does not apply to—
a: pay-as-you-earn (PAYE):
b: fringe benefit tax (FBT):
c: employer’s superannuation contribution tax (ESCT):
d: resident withholding tax (RWT):
e: non-resident withholding tax (NRWT). Link with subpart DA
3: This section overrides the general permission. ancillary tax deduction ESCT FBT general permission global anti-base erosion model rules income tax New Zealand NRWT pay PAYE RWT tax 2004 No 35 s DB 1 Section DB 1(1)(b) replaced 28 March 2024 section 35(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DB 1(1)(bb) inserted 1 July 2014 section 41 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 1 list of defined terms global anti-base erosion model rules inserted 28 March 2024 section 35(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DB 2: Goods and services tax
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:
ab: a flat-rate credit, as defined in section 2(1)
b: goods and services tax (GST) payable by them to the Commissioner. Deduction
2: A registered person is allowed a deduction for deductible output tax
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. Treatment of flat-rate credit
2B: For the purposes of subsections (1) and (2), an underlying supplier referred to in section 8C listed services. However, this subsection does not apply if the underlying supplier has received a flat-rate credit, as defined in section 2(1) section CH 5B Exclusion
3: Subsection (2) does not apply to an adjustment made in relation to a capital asset. 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 54 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 deductible output tax deduction depreciable property depreciation loss general limitation general permission goods GST GST payable income income year input tax output tax pay registered person services supplement 2004 No 35 s DB 2 Section DB 2(1)(ab) inserted 29 March 2025 section 38(1) section 38(4) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DB 2(2) amended 1 April 2011 section 37(2) Taxation (GST and Remedial Matters) Act 2010 Section DB 2(2) amended 21 December 2010 section 37(1) Taxation (GST and Remedial Matters) Act 2010 Section DB 2(2) amended 7 December 2009 section 10 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB (2B) heading inserted 1 April 2024 section 36 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DB (2B) inserted 1 April 2024 section 36 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DB 2(2B) amended 29 March 2025 section 38(2) section 38(4) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DB 2(3) substituted 1 April 2011 section 37(3) Taxation (GST and Remedial Matters) Act 2010 Section DB 2 list of defined terms deductible output tax inserted 21 December 2010 section 37(4)(a) Taxation (GST and Remedial Matters) Act 2010 Section DB 2 list of defined terms income year inserted 29 March 2025 section 38(3) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DB 2 list of defined terms taxable supply repealed 21 December 2010 section 37(4)(b) Taxation (GST and Remedial Matters) Act 2010
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 Taxable activity
3: In this section, taxable activity section 6 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 pay private limitation return of income supplement tax year taxable activity taxable period 2004 No 35 s DB 3 Section DB 3(4) substituted 6 October 2009 section 68(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 3(4) list of defined terms capital limitation inserted 6 October 2009 section 68(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 13(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 permission general limitation income year pay supplement 2004 No 35 s DB 4
DB 4B: Fees to purchase funds in tax pooling accounts
Deduction
1: A person is allowed a deduction for expenditure incurred in purchasing an amount held in a tax pooling account to pay a liability for provisional tax, terminal tax, or an increase in an assessment of tax as described in sections RP 17 to RP 21 Timing of deduction
2: The deduction is allocated to the income year in which the amount is transferred into the person's tax account by the Commissioner to satisfy the person's obligation to pay the tax. Link with subpart DA
3: This section supplements the general permission and overrides the private limitation, the employment limitation, and the withholding tax limitation. The other general limitations still apply. amount assessment Commissioner deduction employment limitation general permission income year intermediary pay private limitation provisional tax tax account with the Commissioner tax pooling account terminal tax withholding tax limitation Section DB 4B inserted 29 August 2011 section 14 Taxation (Tax Administration and Remedial Matters) Act 2011 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. Relationship with subpart DG
1B: Subpart DG 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 2004 No 35 s DB 5 Section DB 5(1B) heading inserted 17 July 2013 section 24(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 5(1B) inserted 17 July 2013 section 24(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
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 Conduit financing arrangements
3: 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 2004 No 35 s DB 6 Section DB 6(3) heading repealed 6 October 2009 section 69(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 6(3) repealed 6 October 2009 section 69(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
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 :
b: income exempted under section CW 58 :
bb: income exempted under section CW 59C (Life reinsurance claims from reinsurer outside New Zealand)
c: income exempted under section CW 60 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 Consolidated groups
6: Section FM 12 Relationship with subpart DE
6BA: Subpart DE section CX 17(4B)(c) Relationship with subpart DG
6B: Subpart DG Relationship with subpart DH
6C: Conduit financing arrangements
7: Link with subpart DA
8: 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 close company company consolidated group deduction dividend exempt income exempt income limitation FBT rules fixed establishment general limitation general permission income interest New Zealand non-resident company qualifying company supplement wholly-owned group of companies withholding tax limitation 2004 No 35 s DB 7 Section DB 7(3)(a) amended 30 March 2017 section 45(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 7(3)(b) amended 30 March 2017 section 45(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 7(3)(bb) inserted 30 March 2017 section 45(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 7(3)(bb) amended 1 July 2018 section 9 Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section DB 7(6BA) heading inserted 1 April 2017 section 69(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DB 7(6BA) inserted 1 April 2017 section 69(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DB 7(6B) heading inserted 17 July 2013 section 25(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 7(6B) inserted 17 July 2013 section 25(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 7(6C) heading repealed 1 April 2025 section 36 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DB 7(6C) repealed 1 April 2025 section 36 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DB 7(7) heading repealed 6 October 2009 section 70(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 7(7) repealed 6 October 2009 section 70(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 7 list of defined terms close company inserted 1 April 2017 section 69(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DB 7 list of defined terms FBT rules inserted 1 April 2017 section 69(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017
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 that is part of the same group of companies. Exclusion: group not in existence at year end
2: Subsection (1) does not apply if the 2 companies are not part of the same group of companies at the end of the tax year that corresponds to the income year in which the deduction is allowed. Deduction: interest after resident’s restricted amalgamation
3: A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company that has ended its existence on a resident’s restricted amalgamation. Exclusion: group not in existence immediately before resident’s restricted amalgamation
4: Subsection (3) does not apply if the 2 companies were not part of the same group of companies immediately before the resident’s restricted amalgamation. Application from income year of resident’s restricted amalgamation
5: Subsection (3) applies in the income year in which the resident’s restricted amalgamation occurs and in later income years. Consolidated groups
6: Section FM 12 Relationship with subpart DE
6BA: Subpart DE section CX 17(4B)(c) Relationship with subpart DG
6B: Subpart DG Relationship with subpart DH
6C: Conduit financing arrangements
7: Link with subpart DA
8: 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. close company company consolidated group deduction exempt income limitation FBT rules general limitation general permission group of companies income year interest resident’s restricted amalgamation share supplement withholding tax limitation 2004 No 35 s DB 8 Section DB 8(6BA) heading inserted 1 April 2017 section 70(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DB 8(6BA) inserted 1 April 2017 section 70(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DB 8(6B) heading inserted 17 July 2013 section 26(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 8(6B) inserted 17 July 2013 section 26(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 8(6C) heading repealed 1 April 2025 section 37 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DB 8(6C) repealed 1 April 2025 section 37 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DB 8(7) heading repealed 6 October 2009 section 71(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 8(7) repealed 6 October 2009 section 71(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 8 list of defined terms close company inserted 1 April 2017 section 70(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DB 8 list of defined terms FBT rules inserted 1 April 2017 section 70(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017
DB 9: Interest incurred on money borrowed to acquire shares in qualifying companies
Deduction for interest incurred
1: The deduction that a shareholder in a qualifying company has for interest in an income year is reduced by the amount of non-cash dividends, other than taxable bonus issues, derived by them or an associated person from the company in the income year. Exempt income
2: In determining the amount of the deduction that the shareholder has for the interest, section CW 15(1) dividend Associated persons
3: If the associated person referred to in subsection (1) is associated with more than 1 shareholder in the company, the amount of non-cash dividends is apportioned among the associated shareholders according to their effective interests in the company in the income year. Allocation of dividend
4: If section CD 39 Link with subpart DA
5: This section overrides—
a: the general permission; and
b: the exempt income limitation. amount associated person bonus issue deduction dividend effective interest exempt income exempt income limitation general permission income year interest non-cash dividend pay qualifying company share shareholder taxable bonus issue 2004 No 35 s HG 9(3)–(5)
DB 10: Interest or expenditure connected to profit-related
When this section applies
1: This section applies for the purposes of section FA 2 No deduction
2: A company issuing a profit-related debenture
a: interest payable under the debenture; or
b: expenditure or loss incurred in connection with the debenture; or
c: expenditure or loss incurred in borrowing the money secured by or owing under the debenture. Relationship with sections DB 5 to DB 8
3: This section overrides sections DB 5 to DB 8 Link with subpart DA
4: This section overrides the general permission. debenture deduction general permission interest pay profit-related debenture 2004 No 35 ss FC 1(1) FC 2(2) Section DB 10 heading amended 1 April 2015 Act section 42(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 10(2) amended 1 April 2015 Act section 42(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 10 list of defined terms substituting debenture repealed 1 April 2015 Act section 42(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DB 10B: Interest or expenditure connected to stapled debt security
No deduction
1: A company that issues a stapled debt security is denied, while section FA 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 10B inserted 6 October 2009 section 72 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Financial arrangements adjustments
DB 11: Negative base price adjustment
Deduction
1: A person who has a negative base price adjustment under section EW 31(4) section CC 3 Deduction: self-remission
1B: A person who has a negative base price adjustment under section EW 31(4) Deduction: cessation of LTCs and dissolution of limited partnerships
1C: A person who has a negative base price adjustment under section EW 31(4)
a: section EW 47B
b: the amount is equal to or less than the consideration that they are treated as having paid, or that is or will be payable, by them for or under the relevant financial arrangement, under section EW 47B(2)(a) 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 self-remission supplement 2004 No 35 s DB 9 Section DB 11(1B) heading inserted 30 March 2017 section 46(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 11(1B) inserted 30 March 2017 section 46(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 11(1C) heading inserted 29 March 2018 section 44(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DB 11(1C) inserted 29 March 2018 section 44(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DB 11 list of defined terms self-remission inserted 30 March 2017 section 46(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
DB 12: Base price adjustment under old financial arrangements rules
Deduction
1: A person is allowed a deduction for an amount that is a deduction under section EZ 37(6) EZ 38(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 2004 No 35 s DB 9B
DB 13: Repayment of debt
in certain circumstances Deduction
1: When section EW 49(5)(b) disposed of or EW 49B(5)(b) the relevant subsection 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 2004 No 35 s DB 10 Section DB 13 heading amended 1 April 2017 section 47(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 13(1) amended 1 April 2017 section 47(2)(a) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 13(1) amended 1 April 2017 section 47(2)(b) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 13(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DB 14: 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 51(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 24
b: the requirements of section DB 24
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 51(4) Link with subpart DA
5: This section supplements the general permission and overrides all the general limitations. deduction general limitation general permission loss pay security payment supplement 2004 No 35 s DB 11
DB 15: 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 2004 No 35 s DB 12 Share-lending arrangements and excepted financial arrangements Heading amended 26 June 2019 section 55 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
DB 16: 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 23 to DB 26 amount deduction general permission share-lending arrangement share-lending collateral 2004 No 35 s DB 12B
DB 17: 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 OB 64 RE 25 amount deduction imputation credit pay replacement payment share-lending arrangement 2004 No 35 s DB 12C Section DB 17 list of defined terms portfolio investment-linked life fund repealed 29 August 2011 section 140(1) Taxation (Tax Administration and Remedial Matters) Act 2011
DB 17B: Transfers of emissions units under certain excepted financial arrangements
A person is denied a deduction for an amount of expenditure that relates to the market value of an emissions unit and is incurred by a person in a transfer of the emissions unit under an arrangement that is an excepted financial arrangement under section EW 5(11C) amount arrangement emissions unit excepted financial arrangement excluded income Section DB 17B inserted 26 June 2019 section 56 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Premises or land costs
DB 18AA: Square metre rate method
When this section applies
1: A person may choose to apply this section to determine the amount of a deduction, in an income year, for the proportion of business use of a premises premises Amount of deduction
2: The amount of the deduction allowed in an income year for the business use of the premises is calculated using the formula— (total premise costs × business proportion) + Definition of items in formula
3: In the formula,—
a: total premise costs
b: business proportion
c: business square metres
d: square metre rate No other deductions allowed
4: A person who makes an election to apply this section under subsection (1) is not entitled to claim any other deductions for the business use of the premises. Setting square metre rates
5: For the purposes of this section, the Commissioner must from time to time set and publish square metre rates. amount business use Commissioner deduction income year Section DB 18AA inserted 1 April 2017 section 71(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DB 18AA(1) amended 18 March 2019 section 150(1) section 150(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section DB 18AA(3) replaced 18 March 2019 section 150(2) section 150(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
DB 18A: Ring-fenced allocations: disposal of residential land within 5 years
Section DB 18A repealed 26 June 2019 section 57 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
DB 18AB: Deduction cap: disposal of residential land within 5 years to associated persons
Section DB 18AB repealed 26 June 2019 section 58 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
DB 18: 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 2004 No 35 s DB 13
DB 19: Expenses in application for resource consent
When this section applies
1: This section applies when a person who incurs expenditure for the purpose of applying for the grant of a resource consent under the Resource Management Act 1991
a: does not obtain the grant because the application is not lodged or is withdrawn, or because the grant is refused:
b: obtains the grant but does not use the resource consent before it lapses or is surrendered. Deduction
1B: The person is allowed a deduction for the expenditure—
a: that the person incurs in relation to the application or intended application; and
b: that would have been part of the cost of depreciable property, or otherwise a deduction, if the application or intended application had been granted or if the resource consent had been used; 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—
a: the person decides not to lodge the application, withdraws the application, or is refused the grant; or
b: the resource consent lapses or is surrendered. Link with subpart DA
3: This section overrides the capital limitation. The general permission and other general limitations still apply. capital limitation deduction general limitation general permission income year 2004 No 35 s DB 13B Section DB 19 heading replaced 30 June 2014 section 43(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 19(1) heading replaced 30 June 2014 section 43(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 19(1) replaced 30 June 2014 section 43(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 19(1) amended 23 December 2023 section 6 Resource Management (Natural and Built Environment and Spatial Planning Repeal and Interim Fast-track Consenting) Act 2023 Section DB 19(1B) heading inserted 30 June 2014 section 43(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 19(1B) inserted 30 June 2014 section 43(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 19(2) replaced 30 June 2014 section 43(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 19 list of defined terms accounting year repealed 30 March 2017 section 48 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
DB 20: 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 2004 No 35 s DB 14
DB 20B: Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence
When this section applies
1: This section applies when—
a: a person (the payer payee land right a leasehold estate not including a perpetual right of renewal, or is a licence
b: the payer is the person who owns—
i: the land right:
ii: the estate in land from which the land right is granted; and
c: the payee is the person who is obtaining the land right. Deduction
2: The payer is allowed a deduction for the amount. Relationship 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 deduction estate general limitation general permission land leasehold estate own Section DB 20B inserted 17 July 2013 section 27(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 20B(1)(a) amended 1 April 2015 section 44(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 20B list of defined terms depreciable intangible property repealed 30 March 2022 section 65 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
DB 20C: Consideration for agreement to surrender leasehold estate or terminate licence
When this section applies
1: This section applies when—
a: a person (the payer payee land right a leasehold estate not including a perpetual right of renewal or is a licence
b: the payer is a person who owns the land right or a person who owns the estate in land from which the land right is granted; and
c: the payee is a person who owns the estate in land from which the land right is granted or a person who owns the land right. Deduction
2: The payer is allowed a deduction for the amount. Relationship 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 deduction estate general limitation general permission land leasehold estate own Section DB 20C inserted 17 July 2013 section 27(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 20C(1)(a) amended 30 June 2014 section 45(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DB 21: 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 11
4: This section is overridden by section EJ 11 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 pay repairs supplement term of the lease 2004 No 35 s DB 15
DB 22: 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 income year in which the lessor receives the amount or in any of the following 4 income 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 46 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 income year in which the expenditure is incurred through the operation of—
i: section CC 2
ii: section EI 5
iii: section EI 6 Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. amount assessable income deduction general limitation general permission income year own supplement 2004 No 35 s DB 16
DB 22B: Amounts paid for commercial fit-out for building
When this section applies
1: This section applies when a person incurs expenditure relating to a building. Determining whether expenditure of capital nature
2: For the purpose of determining whether the expenditure is capital in nature, expenditure relating to an item of commercial fit-out for the building is treated as not relating to the building. commercial fit-out Section DB 22B inserted 24 February 2016 section 94(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Revenue account property
DB 23: Cost of revenue account property
Deduction
1: A person is allowed a deduction for expenditure that they incur as the cost of revenue account property. No deduction
2: Despite subsection (1), a person is denied a deduction for expenditure incurred as the cost of revenue account property if—
a:
b: section CX 55 CX 56B CX 56C property; and
c: for a person who is a life insurer, the expenditure would, in the absence of this subsection, be a deduction included as their policyholder base allowable deduction. Relationship with sections CU 2 and DU 3
2B: Sections CU 2 DU 3 Link with subpart DA
3: Subsection (1) supplements the general permission and overrides the capital limitation and the private limitation. Subsection (2) overrides the general permission. The other general limitations still apply. associated mining operations capital limitation deduction general limitation general permission land life insurer mineral miner mining operations policyholder base allowable deduction private limitation revenue account property 2004 No 35 s DB 17 Section DB 23(2) heading substituted 29 August 2011 section 15(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DB 23(2)(a) repealed 1 April 2010 section 73(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 23(2)(b) amended 30 March 2017 section 49(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 23(2)(b) amended 29 August 2011 section 15(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DB 23(2)(c) inserted 30 March 2017 section 49(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 23(2B) heading inserted 1 April 2014 section 32(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 23(2B) inserted 1 April 2014 section 32(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 23(3) replaced 30 March 2021 section 27(1) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section DB 23 list of defined terms associated mining operations inserted 1 April 2014 section 32(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 23 list of defined terms land inserted 1 April 2014 section 32(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 23 list of defined terms life insurer inserted 30 March 2017 section 49(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 23 list of defined terms mineral miner inserted 1 April 2014 section 32(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 23 list of defined terms mining operations inserted 1 April 2014 section 32(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 23 list of defined terms policyholder base allowable deduction inserted 30 March 2017 section 49(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 23 list of defined terms portfolio investment entity repealed 6 October 2009 section 73(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 23 list of defined terms private limitation inserted 30 March 2021 section 27(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
DB 23B: Revenue account property: certain intra-group transactions
When this section applies
1: This section applies when—
a: a company that is part of a consolidated group at a time during an income year derives an amount of income from a transaction or arrangement with another company in the consolidated group at the same time; and
b: the transaction or arrangement relates to an excepted financial arrangement that—
i: is revenue account property; and
ii: ceases to exist, whether through redemption or cancellation, or on amalgamation or liquidation, or otherwise; and
c: the amount is excluded income under section FM 8 No deduction for expenditure incurred
2: Despite section DB 23 No deduction for closing value
3: Despite section DB 49 Link with subpart DA
4: This section overrides the general permission. The other general limitations still apply. amalgamation amount arrangement cancellation company consolidated group deduction excepted financial arrangement excluded income general permission income income year liquidation revenue account property Section DB 23B inserted 29 March 2018 section 47(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DB 23C: Revenue account property: cost of some residential land reduced
Section DB 23C repealed 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DB 24: 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 (the 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 tax loss, in the calculation of which the amount used is taken into account; and
f: company A, or a company that is part of the same group of companies as company A at any time in the income year in which company B or company C has the tax loss, offsets an amount for the tax loss under section IC 1
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 IC 1 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 tax loss; and
b: company A incurs it in an income year before the income year referred to in subsection (1)(g); 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 IC 1 Link with subpart DA
5: This section overrides the general permission. amount company deduction general permission group of companies income year loss share tax loss tax year 2004 No 35 s DB 18
DB 25: Cancellation of shares held as revenue account property
When this section applies
1: This section applies for the purposes of section FA 4(3)(b) reacquiring No deduction
2: A shareholder is denied a deduction for the amount added to the cost of their remaining shares of the same class as that of the share cancelled, unless the share is trading stock of the shareholder. Link with subpart DA
3: This section overrides the general permission. deduction general permission interest 2004 No 35 s FC 4(f)(iv) Section DB 25(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 25 list of defined terms profit-related debenture repealed 1 April 2015 Act section 46(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 25 list of defined terms substituting debenture repealed 1 April 2015 Act section 46(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DB 26: 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 3 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 2004 No 35 s DB 19
DB 27: 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 13 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 2004 No 35 s DB 20
DB 28: 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 14 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 × 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 2004 No 35 s DB 21
DB 29: Apportionment when land acquired with other property
If a person derives income under any of sections CB 6A to CB 14 income land property 2004 No 35 s FB 4A Section DB 29 amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DB 29 amended 30 March 2021 section 29 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
DB 30: Cost of certain minerals
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 listed industrial mineral
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 29 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 2004 No 35 s DB 22 Section DB 30 heading replaced 1 April 2014 section 33(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 30(1)(b) amended 1 April 2014 section 33(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Bad debts
DB 31: 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 a debt—
i: written off as bad in the income year:
ii: for which the debtor is released from making all remaining payments under the Insolvency Act 2006 Part 5 subparts 1 2 Companies Act 1993 section EW 29
iii: for which the debtor is a company that is released from making all remaining payments by a deed or agreement of composition, and the person is required to calculate a base price adjustment by section EW 29
b: in the case of the bad debts described in subsections (2) to (5), the requirements of the relevant subsection are met. 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 a requirement
b: the amount is attributable to the income; and
bb: the person is not associated with the debtor, or is associated with the debtor but the debtor has no deductions for the financial arrangement; and
c: subsection (5) does not limit the deduction. Deduction: financial arrangement debt: dealers and holders
3: A person is allowed a deduction, quantified in subsection (3B), for an amount of a bad debt owing under a financial arrangement to which the financial arrangement rules apply, if—
a: the person carries on a business for the purpose of deriving assessable income; and
b: the business includes dealing in or holding financial arrangements that are the same as, or similar to, the financial arrangement; and
c: a requirement of subsection (1)(a) is met for the bad debt; and
d: the person is not associated with the person owing the amount written off. Amount of deduction under subsection (3)
3B: For the purposes of subsection (3), the amount of the deduction for the amount owing under the financial arrangement is the lesser of—
a: the amount provided by subsection (4B); and
b: the amount provided by subsection (5). Deduction: financial arrangement debt: dealers in property or services
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 the requirement of subsection (1)(a)(i)
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. Amount for purposes of subsections (3) and (3B)
4B: For the purposes of subsections (3) and (3B), the amount is the least of—
a: the amount of consideration that the person pays for acquiring the financial arrangement:
b: the amount owing under the financial arrangement:
c: the amount calculated using the following formula, treating the calculation of a negative amount as zero: amount owing − limited recourse consideration + adjustment amount Definition of items in formula
4C: In the formula in subsection (4B)(c),—
a: amount owing
i: the amount of consideration that the person pays for acquiring the financial arrangement:
ii: the amount owing under the financial arrangement:
b: limited recourse consideration financial arrangement:
c: adjustment amount section EW 15D Limited recourse: base price adjustment
4D: If subsection (4B)(c) applies for an amount owing under a financial arrangement, then the person is allowed a deduction, at the time the person performs a base price adjustment for the related limited-recourse arrangement, of an amount equal to the amount owing under the financial arrangement minus the total amount of deductions for the financial arrangement under subsections (2) and (3) that have arisen before the base price adjustment. Definition of items in formula
4E: 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 IC 1
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 tax loss, in the calculation of which the amount used is taken into account; and
e: company A, or a company that is part of the same group of companies as company A at any time in the income year in which company B or company C has the tax loss, offsets an amount for the tax loss under section IC 1
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. A definition
5B: In this section, limited-recourse arrangement an amount owing under a financial arrangement (the debt
a: payment of some or all of the debt to the person:
b: failure to make payment of some or all of the debt to the person. 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 subsections (3) and (4D) override agreement for the sale and purchase of property or services amount arrangement assessable income associated person business company deduction financial arrangement financial arrangements rules general limitation general permission group of companies income year limited-recourse arrangement supplement tax loss tax year 2004 No 35 s DB 23 Section DB 31(1)(a) replaced 27 February 2014 section 34(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 31(2)(a) amended 27 February 2014 section 34(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 31(2)(bb) inserted 1 July 2017 section 50(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 31(3) heading replaced 24 February 2016 section 95(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(3) replaced 24 February 2016 section 95(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(3B) heading inserted 24 February 2016 section 95(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(3B) inserted 24 February 2016 section 95(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(4) heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(4)(a) amended 27 February 2014 section 34(5) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 31(4B) heading replaced 24 February 2016 section 95(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(4B) replaced 24 February 2016 section 95(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(4B)(c) formula amended 30 March 2017 section 50(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 31(4C) heading replaced 24 February 2016 section 95(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(4C) replaced 24 February 2016 section 95(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(4C)(b) amended 30 March 2017 section 50(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 31(4C)(c) inserted 30 March 2017 section 50(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DB 31(4D) heading replaced 24 February 2016 section 95(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(4D) replaced 24 February 2016 section 95(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(4E) heading repealed 24 February 2016 section 95(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(4E) repealed 24 February 2016 section 95(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(5B) heading inserted 27 February 2014 section 34(7) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 31(5B) inserted 27 February 2014 section 34(7) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 31(5B) amended 24 February 2016 section 95(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(6)(b)(iii) amended 24 February 2016 section 95(5) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31(6)(b)(iii) replaced 24 February 2016 section 95(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 31 list of defined terms arrangement inserted 27 February 2014 section 34(8) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DB 31 list of defined terms limited-recourse arrangement inserted 27 February 2014 section 34(8) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DB 32: 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 an income 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 income 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 income 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 income 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 income year supplement trustee trustee income 2004 No 35 s DB 24 Research and development
DB 33: 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 2004 No 35 s DB 25
DB 34: 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. Expenditure on derecognised non-depreciable assets
3: Subsection (1) applies to a person who—
a: incurs expenditure, on the development of an intangible asset that is not depreciable intangible property,—
i: on or after 7 November 2013; and
ii: before the intangible asset is derecognised or written off by the person as described in paragraph (b); and
b: derecognises or writes off the intangible asset for financial reporting purposes under—
i: paragraph 112(b) of the new reporting standard; or
ii: paragraph 5.14 of the old reporting standard. 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 as 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; and
b: has written off the expenditure as 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
7: A person who is allowed a deduction under this section for expenditure that is not interest and is described in subsection (2), (4), or (5)
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 23 Allocation of deduction for derecognised non-depreciable assets
7B: A person who is allowed a deduction as provided by subsection (3) must allocate the deduction to the income year in which the relevant intangible asset is derecognised or written off by the person for financial reporting purposes under—
a: paragraph 112(b) of the new reporting standard; or
b: paragraph 5.14 of the old reporting standard. Section need not be applied
8: 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 to which the return relates. Relationship with section EA 2
9: 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
10: 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 development general limitation general permission income income year new reporting standard old reporting standard research return of income revenue account property 2004 No 35 s DB 26 Section DB 34(2) substituted 7 December 2009 section 11(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 34(2) amended 1 April 2008 section 338(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 34(3) heading replaced 24 February 2016 section 96(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 34(3) replaced 24 February 2016 section 96(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 34(4)(a) amended 1 April 2008 section 338(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 34(4)(b) substituted 7 December 2009 section 11(2) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 34(4)(b) substituted 1 April 2008 section 338(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 34(5)(b) substituted 1 April 2008 section 338(5) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 34(7) amended 24 February 2016 section 96(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 34(7B) heading inserted 24 February 2016 section 96(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 34(7B) inserted 24 February 2016 section 96(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 34 list of defined terms new reporting standard inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 34 list of defined terms old reporting standard inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 34 list of defined terms reporting standard repealed 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DB 35: Some definitions
Definitions
1: In this section, and in section DB 34 development new reporting standard new reporting standard in effect under the Financial Reporting Act 2013 old reporting standard Financial Reporting Act 1993 research new reporting standard 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 34
b: an activity that is neither research nor development for the purposes of section DB 34
c: the date from which the expenditure or the activity is excluded from being research or development. Secondary legislation
3: An Order in Council under subsection (2) is secondary legislation ( see Part 3 development income year new reporting standard old reporting standard research 2004 No 35 s DB 27 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section DB 35(1) substituted 1 April 2008 section 339 Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 35(1) development amended 24 February 2016 section 97(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 35(1) new reporting standard inserted 7 December 2009 section 12 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 35(1) new reporting standard amended 1 April 2014 section 126 Financial Reporting (Amendments to Other Enactments) Act 2013 Section DB 35(1) old reporting standard inserted 7 December 2009 section 12 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 35(1) reporting standard repealed 7 December 2009 section 12 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 35(1) research amended 24 February 2016 section 97(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 35(3) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section DB 35(3) inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section DB 35 list of defined terms new reporting standard inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 35 list of defined terms old reporting standard inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 35 list of defined terms reporting standard repealed 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DB 36: 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 income 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 income year 2004 No 35 s DB 28
DB 37: Expenses in application for patent or design registration
Deduction
1: A person who incurs expenditure for the purpose of applying for the grant of a patent or of a design registration
a: that the person incurs in relation to the application or intended application; and
b: that would have been part of the cost of fixed life intangible property, or otherwise a deduction, if the application or intended 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 person decides not to lodge the application, withdraws the application, or is refused the grant. Link with subpart DA
3: This section overrides the capital limitation. The general permission and other general limitations still apply. capital limitation deduction design registration fixed life intangible property general limitation general permission income year 2004 No 35 s DB 28B Section DB 37 heading replaced 24 February 2016 section 98(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 37(1) replaced 30 June 2014 section 47(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 37(1) amended 24 February 2016 section 98(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 37(2) replaced 30 June 2014 section 47(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DB 37 list of defined terms design registration inserted 24 February 2016 section 98(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DB 38: 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 an income 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 disposes of Deduction: devising invention: proportion of expenditure
4: If the person disposes of disposal disposal 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 income year patent right 2004 No 35 s DB 29 Section DB 38(3) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 38(4) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DB 39: Patent rights acquired before 1 April 1993
When this section applies
1: This section applies when a person disposes of Deduction
2: The person is allowed a deduction on the disposal Amount of deduction
3: The amount is calculated using the formula— (unexpired term of the patent rights at the date of disposal 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 right 2004 No 35 s DB 30 Section DB 39(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 39(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 39(3) formula amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DB 40: Patent applications or patent rights acquired on or after 1 April 1993
When this section applies
1: This section applies when a person disposes of Deduction
2: The person is allowed a deduction on the disposal 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 15
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 right 2004 No 35 s DB 31 Section DB 40(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 40(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DB 40BA: Expenses in application for plant variety rights
Deduction
1: A person who incurs expenditure for the purpose of applying for the grant of plant variety rights and does not obtain the grant because the application is not lodged or is withdrawn, or because the grant is refused, is allowed a deduction for the expenditure—
a: that the person incurs in relation to the application or intended application; and
b: that would have been part of the cost of fixed life intangible property, or otherwise a deduction, if the application or intended 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 person decides not to lodge the application, withdraws the application, or is refused the grant of plant variety rights. 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 fixed life intangible property general limitation general permission income year plant variety rights Section DB 40BA inserted 30 June 2014 section 48 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Unsuccessful software development Heading inserted 2 November 2012 section 21(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
DB 40B: 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 when the copyright in the software is not depreciable property
b: the copyright in the software would have been depreciable property Deduction
2: The person is allowed a deduction for 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 40B inserted 2 November 2012 section 21(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DB 40B(1)(a) amended 24 February 2016 section 99(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DB 40B(1)(b) amended 24 February 2016 section 99(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Corporate gifting Heading replaced 30 March 2022 section 67 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
DB 41: Charitable or other public benefit gifts by company
Who this section applies to
1: Deduction
2: A company a donee organisation No deduction
2B: Despite subsection (2), a company is not allowed a deduction for the amount of a charitable or other public benefit gift it makes, to the extent to which the amount is, for the company, an asset ignored for the purposes of section HR 12 Amount of deduction
3: The deduction for the total of all gifts made in an income year is limited to Exclusion
3B: This section does not apply to a local authority. Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. amount charitable or other public benefit gift deduction donee organisation general limitation general permission income year local authority net income supplement tax year 2004 No 35 s DB 32 Section DB 41(1) heading repealed 1 April 2008 section 340(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 41(1) repealed 1 April 2008 section 340(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 41(2) amended 6 January 2010 section 74(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 41(2) amended 1 April 2008 section 340(2)(a) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 41(2) amended 1 April 2008 section 340(2)(b) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 41(2B) heading inserted 18 March 2019 section 151 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section DB 41(2B) inserted 18 March 2019 section 151 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section DB 41(3) amended 1 April 2008 section 340(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 41(3B) heading inserted 1 April 2022 section 68(1) section 68(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section DB 41(3B) inserted 1 April 2022 section 68(1) section 68(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section DB 41 list of defined terms close company repealed 6 January 2010 section 74(2)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 41 list of defined terms company repealed 6 January 2010 section 74(2)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 41 list of defined terms local authority inserted 1 April 2022 section 68(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section DB 41 list of defined terms recognised exchange repealed 6 January 2010 section 74(2)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 41 list of defined terms share repealed 6 January 2010 section 74(2)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 41 list of defined terms donee organisation inserted 6 January 2010 section 74(2)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Theft and bribery
DB 42: 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 person who misappropriates property is associated with the person who carries on the business. 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 2004 No 35 s DB 33 Section DB 42(2) substituted 1 April 2010 section 75(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DB 43: 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, misappropriating property that—
a: belongs to another person who is neither a partner in the partnership nor the spouse, civil union partner, or de facto partner of a partner; and
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 pay supplement 2004 No 35 s DB 34
DB 44: Restitution of stolen property
Deduction
1: A person who derives income under section CB 32 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 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 2004 No 35 s DB 35
DB 45: Bribes
When this section applies
1: This section applies when a person ( person A section 101 102(2) 103(2) 104(2) 105(2) 105C 105D(1) No deduction
2: Person A is denied a deduction for the amount of the bribe. Exclusions
3: This section does not apply in the circumstances specified in section 105C(3) Definition
4: In this section, bribe section 99 Link with subpart DA
5: This section overrides the general permission. bribe deduction general permission New Zealand 2004 No 35 s DB 36 Section DB 45 replaced 7 November 2015 section 4 Income Tax Amendment Act 2015 Pollution control
DB 46: Avoiding, remedying, or mitigating effects of discharge of contaminant or making of noise
When this section applies
1: This section applies when 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 kind listed in schedule 19
ii: not incurred in relation to revenue account property other than land that is subject to section CB 8
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) 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 19 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 kind listed in schedule 19
b: the appropriate rate under subsection (5) if—
i: the expenditure is of a kind listed in schedule 19, part A, items 2 to 5; and
ii: paragraph (c) does not apply:
c: the rate for the kind of expenditure, the income year, the valuation method adopted under subsection (6), and the person determined by the Commissioner under section 91AAN Schedule 12 rates
5: The rate for expenditure if the requirements of subsection (4)(b) are met is—
a: the rate set out in schedule 12
b: the rate set out in schedule 12, column 1 that corresponds to the rate under paragraph (a) if the person chooses to use the diminishing value equivalent method. 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 28(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 46 replaced 28 March 2024 section 38(1) section 38(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Repayments
DB 47: 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 pay supplement 2004 No 35 s DB 38
DB 48: 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 pay supplement 2004 No 35 s DB 39 Matching rules: revenue account property, prepayments, and deferred payments
DB 49: 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
c: excepted financial arrangements that are revenue account property valued under subpart ED
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 at the end of the previous income year, as calculated under 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 2004 No 35 s DB 40
DB 50: 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 2004 No 35 s DB 41
DB 51: 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 pay supplement 2004 No 35 s DB 42 Adjustments for leases that become finance leases Heading inserted 1 April 2008 section 341 Taxation (Business Taxation and Remedial Matters) Act 2007
DB 51B: Adjustments for leases that become finance leases
When this section applies
1: This section applies when an adjustment made under section FA 11 Deduction
2: The amount of the adjustment is a deduction of the lessor or the lessee, as applicable, in the income year in which the lease becomes a finance lease. Link with subpart DA
3: This section supplements the general permission. The general limitations still apply. deduction finance lease general limitation general permission income year lease 2004 No 35 s FC 8H(7) Section DB 51B inserted 1 April 2008 section 341 Taxation (Business Taxation and Remedial Matters) Act 2007 IFRS leases Heading inserted 30 March 2021 section 30(1) section 30(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
DB 51C: NZ IFRS 16 leases
When this section applies
1: This section applies when a person has, under section EJ 10B Amount and timing of deduction
2: The person is allowed a deduction of the amount of the deduction quantified and allocated under section EJ 10B amount deduction person Section DB 51C inserted 30 March 2021 section 30(1) section 30(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Change to accounting practice
DB 52: Adjustment for change to accounting practice
When this section applies
1: This section applies when a person has, under section EG 2(2) or (3) 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 2004 No 35 s DB 43 Investment income
DB 53: Attributed PIE losses of certain investors
When this section applies
1: This section applies to an investor in a multi-rate PIE when—
a: an amount of attributed PIE loss is attributed under section HM 36
b: either—
i: the investor is a zero-rated investor; or
ii: the PIE calculates its tax liability using the quarterly calculation option under section HM 43 section HM 61 Deduction
2: The investor is allowed a deduction for the amount allocated to the investor's income year in which the PIE's tax year ends. When this section also applies
2B: This section also applies for the purposes of an adjustment under section HM 36B
a: is an investor in a multi-rate PIE; and
b: in relation to an amount attributed to them by the PIE, has a rate of tax applied that is not equal to their prescribed investor rate for the income year; and
c: has an amount of attributed PIE loss for the income year. Link with subpart DA
3: This section supplements the general permission. The general limitations still apply. amount attributed PIE loss attribution period deduction exit period general limitation general permission income tax liability income year investor multi-rate PIE natural person PIE prescribed investor rate quarter resident in New Zealand tax year zero-rated investor 2007 No 97 s DB 53 Section DB 53 substituted 1 April 2010 section 77(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 53(1)(b) replaced 31 March 2023 section 37(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DB 53(2B) heading inserted 30 March 2021 section 31(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section DB 53(2B) inserted 30 March 2021 section 31(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section DB 53 list of defined terms natural person inserted 30 March 2021 section 31(3)(b) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section DB 53 list of defined terms prescribed investor rate inserted 30 March 2021 section 31(3)(b) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section DB 53 list of defined terms resident in New Zealand inserted 30 March 2021 section 31(3)(b) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section DB 53 list of defined terms zero-rated investor inserted 31 March 2023 section 37(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DB 53 list of defined terms zero-rated portfolio investor repealed 30 March 2021 section 31(3)(a) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
DB 54: No deductions for fees relating to interests in multi-rate PIEs
When this section applies
1: This section applies when an investor in an investor class of a multi-rate PIE incurs expenses in relation to their investor interest, and the entity includes the amount in the calculation of its tax liability under section HM 47 No deduction
2: The investor is denied a deduction for the amount. Link with subpart DA
3: This section overrides the general permission. amount deduction general permission investor investor class investor interest multi-rate PIE 2007 No 97 s DB 54 Section DB 54 substituted 1 April 2010 section 78(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 54 heading replaced 17 July 2013 section 28 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DB 54B: Expenditure incurred by foreign investment PIEs
When this section applies
1: This section applies when a foreign investment PIE incurs expenditure or loss in deriving income attributable to—
a: a notified foreign investor in the PIE:
b: a transitional resident who has chosen under section HM 55D(9) No deduction
2: The PIE is denied a deduction for the amount of the expenditure or loss. Relationship with section DB 7
3: This section overrides section DB 7 Link with subpart DA
4: This section overrides the general permission. amount deduction foreign investment PIE general permission income loss notified foreign investor prescribed investor rate transitional resident Section DB 54B inserted 29 August 2011 section 16(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DB 54B(1) replaced 2 November 2012 section 22(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DB 54B list of defined terms prescribed investor rate inserted 2 November 2012 section 22(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DB 54B list of defined terms transitional resident inserted 2 November 2012 section 22(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
DB 54C: Certain expenditure incurred by foreign PIE equivalents
When this section applies
1: This section applies for an income year when a foreign PIE equivalent incurs expenditure or loss in deriving an amount to which section CX 55B No deduction
2: The foreign PIE equivalent is denied a deduction for the amount of the expenditure or loss. Link with subpart DA
3: This section overrides the general permission. amount deduction foreign PIE equivalent general permission income year Section DB 54C inserted 29 March 2018 section 48(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Exempt income Heading repealed 30 June 2014 section 49(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DB 55: Expenditure incurred in deriving exempt dividend
DB 55 repealed 30 June 2014 section 49(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 DB 55(3) replaced 30 June 2014 section 49(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Use of motor vehicle under certain arrangements
DB 56: Expenditure incurred in operating motor vehicle under agreement or arrangement affected by section CX 7
Deduction
1: A party to an agreement or arrangement referred to in section CX 7 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. amount arrangement deduction depreciation loss exempt income limitation general limitation general permission lease motor vehicle 2004 No 35 s DB 45 Payments to spouses, civil union partners, or de facto partners
DB 57: Payments to spouses, civil union partners, or de facto partners other than for services
No deduction without approval
1: A person is denied a deduction for a payment to their spouse, civil union partner, or de facto partner for something other than services, without the Commissioner’s approval. Commissioner’s approval
2: The Commissioner may approve the deduction only if—
a: the Commissioner considers that the payment is genuine; and
b: the payment is incurred by the person exclusively in deriving their assessable income; and
c: the approval is granted before the deduction is claimed. Link with subpart DA
3: This section overrides the general permission. assessable income Commissioner deduction general permission pay 2004 No 35 s GD 4 Hybrid and branch mismatches of deductions and income from multi-jurisdictional arrangements Heading inserted 1 July 2018 section 10(1) section 10(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018
DB 57B: Matching of deductions and income from multi-jurisdictional arrangements
Deduction denied
1: An amount is not a deduction of a person if the deduction is denied under subpart FH Deduction
2: An amount treated as a deduction of a person under subpart FH Link with subpart DA
3: Subsection (1) overrides, and subsection (2) supplements, the general permission. The general limitations still apply. amount deduction general limitation general permission Section DB 57B inserted 1 July 2018 section 10(1) section 10(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Avoidance and non-market transactions
DB 58: Adjustment for avoidance arrangements
Deduction denied
1: An amount is not a deduction of a person if the deduction is denied under—
a: section GA 1
b: section GB 17
c: section GB 18
d: section GB 23
e: section GB 25 Deduction
2: An amount treated as a deduction of a person under any of the following sections is a deduction of the person:
a: section GA 1
b: section GB 23
c: section GB 29
d: section GB 46 Link with subpart DA
3: Subsection (1) overrides, and subsection (2) supplements, the general permission. The general limitations still apply. amount arrangement close company Commissioner deduction depreciation loss director film production expenditure film right general limitation general permission relative shareholder 2004 No 35 ss GB 1(1)–(2C) GC 11A GC 31 GD 3(1), (2) GD 5 GD 12 GD 12A
DB 59: Market value substituted
Transfer pricing arrangements
1: A person may be denied a deduction under section GC 7 Acquisition for below market value
2: A person may be treated as providing an amount—
a: for acquisition of trading stock, under section GC 1 Certain disposals
b: for lease of a property, under section GC 5 Link with subpart DA
3: Subsection (1) overrides, and subsection (2) supplements, the general permission. The general limitations still apply. deduction general limitations general permission lease trading stock 2004 No 35 ss GD 7 GD 10 Section DB 59(2)(a) amended 1 April 2024 section 39 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Emissions units and liabilities under Climate Change Response Act 2002 Heading substituted 6 October 2009 section 80 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DB 60: Acquisition of emissions units
When this section applies
1: This section applies when an emissions unit is transferred to a person for a price of zero—
a: under section 64 subpart 2
b: under a permanent forestry scheme. No deduction
2: The person is denied a deduction for an amount of expenditure or loss incurred as consideration for the emissions unit. Link with subpart DA
3: Subsection (2) overrides the general permission. amount emissions unit general permission loss permanent forestry scheme Section DB 60 substituted 6 October 2009 section 80 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 60(1) substituted 7 September 2010 section 20 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DB 60(1)(b) replaced 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section DB 60 list of defined terms permanent forestry scheme inserted 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020
DB 60B: Liabilities for emissions
When this section applies
1: This section applies when a person incurs a liability—
a: under the Climate Change Response Act 2002
b: to transfer emissions units to the Crown under a permanent forestry scheme. 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 emissions unit general permission permanent forestry scheme post-1989 forest land pre-1990 forest land Section DB 60B inserted 6 October 2009 section 81(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 60B(1) substituted 7 September 2010 section 21(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DB 60B(1)(b) replaced 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section DB 60B emissions unit inserted 7 September 2010 section 21(2) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DB 60B list of defined terms permanent forestry scheme inserted 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020
DB 61: Surrender of certain emissions units for post-1989 forest land emissions
When this section applies
1: This section applies when a person surrenders a pre-1990 forest land emissions unit or fishing quota emissions unit to meet a liability under the Climate Change Response Act 2002 Treated as disposal and reacquisition
2: The person is treated as having disposed of the emissions 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 emissions unit fishing quota emissions unit pre-1990 forest land emissions unit surrender Section DB 61 substituted 7 September 2010 section 22 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Legal expenses Heading added 1 April 2009 section 4 Taxation (Business Tax Measures) Act 2009
DB 62: Deduction for legal expenses
When this section applies
1: This section applies to a person when their total legal expenses for an income year is equal to or less than $10,000. Deduction
2: The person is allowed a deduction for the legal expenses. Definition
3: For the purposes of this section, legal expenses legal services Lawyers and Conveyancers Act 2006 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 deduction general limitation general permission income year legal expenses Section DB 62 added 1 April 2009 section 4 Taxation (Business Tax Measures) Act 2009 Miscellaneous company administration costs Heading inserted 30 June 2014 section 50(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DB 63: Expenses in paying dividends
Deduction
1: A company is allowed a deduction for expenditure incurred in—
a: authorising, allocating, or processing the payment of a dividend:
b: resolving a dispute concerning a matter referred to in paragraph (a). Link with subpart DA
2: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation company deduction dividend general limitation general permission Section DB 63 inserted 30 June 2014 section 50(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DB 63B: Periodic company registration fees
Deduction
1: A listed company is allowed a deduction for expenditure incurred as periodic fees of a recognised exchange for maintaining the registration of the company on the exchange. Link with subpart DA
2: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation company deduction general limitation general permission listed company recognised exchange Section DB 63B inserted 30 June 2014 section 50(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DB 63C: Meetings of shareholders
Deduction
1: A company is allowed a deduction for expenditure incurred in holding an annual meeting of the shareholders of the company to consider the affairs of the company. No deduction
2: A company is denied a deduction for expenditure incurred in holding a special or extraordinary meeting of the shareholders of the company. Link with subpart DA
3: Subsection (1) supplements the general permission and overrides the capital limitation. Subsection (2) overrides the general permission. The other general limitations still apply. capital limitation company deduction general limitation general permission shareholder Section DB 63C inserted 30 June 2014 section 50(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Capital contributions Heading added 28 May 2010 section 76(1) Taxation (Budget Measures) Act 2010
DB 64: Capital contributions
When this section applies
1: This section applies if,—
a: a person has derived a capital contribution after 20 May 2010; and
b: in the absence of this section, the person would be allowed a deduction for the relevant capital contribution property, or for the relevant expenditure for the capital contribution property; and
c: the person has chosen to apply this section in a return of income for the income year in which the capital contribution is derived. Deductions
2: For the purposes of quantifying the amount of depreciation loss under subpart EE subpart DO
a: the capital contribution property's adjusted tax value, base value, cost, or value, as applicable, is reduced by the amount of the capital contribution, under subpart EE
b: the relevant expenditure for the capital contribution property is reduced by the amount of the capital contribution, under subpart DO Links with subpart DA
3: This section overrides the general permission. adjusted tax value amount capital contribution capital contribution property deduction expenditure general permission income income year return of income Section DB 64 inserted 28 May 2010 section 76(1) Taxation (Budget Measures) Act 2010 Section DB 64(1)(b) replaced 17 July 2013 section 29(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 64(2) heading replaced 17 July 2013 section 29(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 64(2) replaced 17 July 2013 section 29(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 64 list of defined terms capital contribution property inserted 17 July 2013 section 29(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DB 64 list of defined terms expenditure inserted 17 July 2013 section 29(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DB 65: Allowance for certain commercial buildings
Section DB 65 repealed 1 April 2020 section 4 COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020
DB 65B: Allowance for embedded fit-out of certain commercial buildings
When this section applies
1: This section applies when—
a: a person owns a commercial building and the building is depreciable property with an annual rate of 0% in an income year; and
b: the building was acquired in the 2010–11 or an earlier income year; and
c: the person has never had a deduction for commercial fit-out that was acquired at the same time as the building and relates to the building other than under—
i: this section:
ii: section DB 65 section 4 Deduction for commercial fit-out
2: Except as provided in subsection (4), the person is treated as having a loss for the income year equal to the amount calculated using the formula— starting pool × 0.015 × whole months ÷ 12. Calculation of starting pool
3: Starting pool is the amount given by the formula— (0.15 × building atv) − fit-out atv. Deduction limited to value of starting pool
4: Despite subsection (2), if the amount given by the formula in subsection (2) is more than the amount given by the formula in subsection (5), then the person is treated as having a loss for the income year equal to the amount given by the formula in subsection (5). Calculation of deduction limit
5: For the purposes of subsection (4), the formula is— starting pool − historical fit-out deductions − fit-out deductions − imputed deductions. Imputed deductions
6: The amount of the imputed deductions is— starting pool × 0.015 × 4. Definition of items in formulas
7: In the formulas in subsections (2), (3), (5), and (6), as applicable, —
a: starting pool
b: whole months
c: building atv subpart EE
d: fit-out atv subpart EE
i: the items of commercial fit-out relate to the building and were acquired after the building was acquired; and
ii: the person has had a deduction for an amount of depreciation loss for the items of commercial fit-out:
e: historical fit-out deductions section DB 65 section 4
f: fit-out deductions
g: imputed deductions Treatment of amounts under specific and general rules for deductions
8: The capital limitation does not apply to a loss under this section merely because the item of property is itself of a capital nature. adjusted tax value amount assessable income capital limitation commercial building commercial fit-out deduction depreciable property depreciation loss income year Section DB 65B inserted 1 April 2024 section 40(1) section 40(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Feasibility expenditure Heading inserted 30 March 2021 section 32(1) section 32(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
DB 66: Feasibility expenditure: spread deduction
When this section applies
1: This section applies for expenditure to the extent to which a person has—
a: incurred expenditure for an income year after the 2019–20 income year in relation to making progress towards completing, creating, or acquiring property that, if it were to be completed, created, or acquired, would be—
i: depreciable property for which the depreciation rate is more than 0%:
ii: revenue account property; and
b: abandoned further progress in relation to the property, with the result that it is not completed, created, or acquired; and
c: no deduction in relation to the expenditure under any other provision. When this section does not apply
2: Despite subsection (1) this section does not apply to the extent to which expenditure is in relation to property on the following list:
a: land, unless it is fixed life intangible property:
b: an excepted financial arrangement:
c: intangible property or intellectual property, unless it is fixed life intangible property. Deduction: spread forward
3: The person is allowed a deduction for the expenditure described in subsection (1), in equal proportions over a period of 5 income years starting in the income year in which they abandon further progress. However, a person is not allowed any remaining deduction portions for the income year in which they complete or create the relevant property, or acquire the relevant property or similar property, or for later years. 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 depreciable property excepted financial arrangement financial arrangement fixed life intangible property general limitation general permission income year intellectual property land person Section DB 66 inserted 30 March 2021 section 32(1) section 32(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
DB 67: Feasibility expenditure: immediate deduction
When this section applies
1: This section applies for expenditure to the extent to which a person has—
a: incurred expenditure for an income year after the 2019–20 income year in relation to making progress towards completing, creating, or acquiring property that, if it were to be completed, created, or acquired, would be—
i: depreciable property for which the depreciation rate is more than 0%:
ii: revenue account property; and
b: no deduction for the expenditure under any other provision. When this section does not apply
2: Despite subsection (1) this section does not apply to expenditure that is in relation to property on the following list:
a: land, but excluding fixed life intangible property:
b: an excepted financial arrangement:
c: intangible property or intellectual property, but excluding fixed life intangible property. Deduction: immediate
3: The person is allowed a deduction for the expenditure described in subsection (1), if their total expenditure described in subsection (1) in relation to all property is $10,000 or less for the income year. 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 depreciable property excepted financial arrangement financial arrangement fixed life intangible property general permission general limitation income year intellectual property land person Section DB 67 inserted 30 March 2021 section 32(1) section 32(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Utilities distribution assets Heading inserted 31 March 2023 section 38(1) section 38(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
DB 68: Amounts paid for utilities distribution assets
When this section applies
1: This section applies when a person incurs expenditure in relation to either a utilities distribution asset or a utilities distribution network. Determining whether expenditure of capital nature
2: For the purpose of determining whether the expenditure is capital in nature, the expenditure is treated as relating to a utilities distribution asset and is treated as not being incurred in relation to a utilities distribution network. utilities distribution asset utilities distribution network Section DB 68 inserted 31 March 2023 section 38(1) section 38(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Deemed payments for services Heading inserted 29 March 2025 section 39 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
DB 69: Amount of resale royalty retained by collection agency
When this section applies
1: This section applies to a person—
a: who receives a resale royalty under section 18
b: to whom section CC 9B Deduction
2: The person is allowed a deduction for the amount of the resale royalty retained by the collection agency under section 20 Link with subpart DA
3: This section supplements the general permission. amount collection agency deduction general permission resale royalty supplement Section DB 69 inserted 29 March 2025 section 39 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Emergency events Heading inserted 1 April 2025 section 40 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
DB 70: Deduction for interruption expenditure due to emergency event
Deduction
1: A person is allowed a deduction for expenditure incurred while their income-earning activity is interrupted by an emergency event if they meet the requirements of section FP 13 Link with subpart DA
2: This section supplements the general permission. deduction emergency event general permission supplement Section DB 70 inserted 1 April 2025 section 40 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DB 70 editorial change 2 May 2025 sections 86(1) 87(l)(iv) Legislation Act 2019
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 10(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 pay supplement 2004 No 35 s DC 1
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 has a right to receive the pension under a deed for a fixed period or for life or, in the case of the spouse, civil union partner, or de facto partner, until the spouse, civil union partner, or de facto partner enters a new marriage, civil union, 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 has a right to receive the pension under a deed for a fixed period or for life or, in the case of the spouse, civil union partner, or de facto partner, until the 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 FB 11
7: Section FB 11 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 pay relative shareholder supplement 2004 No 35 s DC 2
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 of a deceased former partner, if—
a: the partnership in which the former partner was a partner (the 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 has a right to receive the pension under a deed for a fixed period or for life or, in the case of the spouse, civil union partner, or de facto partner, until the spouse, civil union partner, or de facto partner enters a new marriage, civil union, or de facto relationship; and
d: the pension is paid for the former partner’s services in the old partnership. Relationship with section HG 2
3B: Section HG 2 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 pay share supplement 2004 No 35 s DC 3 Section DC 3(3B) heading inserted 29 March 2025 section 41(1) section 41(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DC 3(3B) inserted 29 March 2025 section 41(1) section 41(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
DC 3B: Payments to working owners
Deduction
1: A person who has an effective look-through interest for a look-through company (an owner Amount of deduction
2: The amount of the deduction is limited to the amount of the payment authorised by the contract of employment and any bonus, whether or not the payment of a bonus is authorised by the contract. Meaning of contract of employment
3: In this section, contract of employment
a: specifies the terms and conditions of the services to be performed by the working owner; and
b: specifies the amount payable to the working owner for the performance of the services; and
c: is in writing. Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. amount contract of employment deduction effective look-through interest general limitation general permission look-through company pay supplement working owner Section DC 3B inserted 1 April 2011 section 40(1) Taxation (GST and Remedial Matters) Act 2010
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 GB 23
4: This section is overridden by section GB 23 Relationship with section HG 2
4B: Section HG 2 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 pay share supplement 2004 No 35 s DC 4 Section DC 4(4B) heading inserted 29 March 2025 section 42(1) section 42(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DC 4(4B) inserted 29 March 2025 section 42(1) section 42(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
DC 5: Payments to spouses, civil union partners, or de facto partners: services
No deduction without approval
1: A person is denied a deduction for a payment to their spouse, civil union partner, or de facto partner for services without the Commissioner’s approval. When Commissioner can give consent
2: The Commissioner may approve the deduction only if—
a: the Commissioner considers that the payment is for services rendered; and
b: the services are not domestic services or otherwise services connected with the home; and
c: the payment is incurred by the person exclusively in deriving their assessable income; and
d: the approval is granted before the deduction is claimed. Relationship with section GB 23
3: This section is overridden by section GB 23 Link with subpart DA
4: This section overrides the general permission. assessable income Commissioner deduction general permission pay 2004 No 35 s GD 4
DC 6: 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 pay superannuation scheme supplement 2004 No 35 s DC 5
DC 7: Contributions to employees’ superannuation schemes
Deduction
1: An employer is allowed a deduction for a superannuation contribution Exclusion
1B: Timing of deduction
2: The deduction is allocated to the income year in which the employer makes the contribution. Relationship with section EJ 21
3: Subsection (2) is overridden by section EJ 21 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 contribution superannuation scheme tax credit 2004 No 35 s DC 6 Section DC 7(1) amended 6 October 2009 section 82(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DC 7(1B) heading repealed 1 April 2009 section 52 Taxation (Urgent Measures and Annual Rates) Act 2008 Section DC 7(1B) repealed 1 April 2009 section 52 Taxation (Urgent Measures and Annual Rates) Act 2008 Section DC 7 list of defined terms superannuation contribution inserted 6 October 2009 section 82(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DC 7 list of defined terms tax credit inserted 1 April 2008 section 124(2) Taxation (KiwiSaver) Act 2007
DC 8: Attribution of personal services
When this section applies
1: This section applies when, under sections GB 27 to GB 29 associated entity working person Deduction
2: The associated entity 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 working 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 2004 No 35 s DC 7
DC 9: 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 CE 10 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 CE 10 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 2004 No 35 s DC 8
DC 10: Disposal When this section applies
1: This section applies when—
a: a person (the seller disposes of 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 disposal
c: the seller and the buyer agree in writing, under the disposal Deduction: parties not associated
2: If the seller and the buyer are not associated persons at the time of the disposal
a: the seller is allowed a deduction, in the income year of the disposal
b: the seller is treated under section EA 4(4) time of the disposal Deduction: parties associated
3: If the seller and the buyer are associated persons at the time of the disposal
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 disposed of
b: subsection (2) does not apply, and section EA 4(5) Deduction: excess
4: The buyer is allowed a deduction for any part of the amount of employment income that the buyer pays that is more than the provision made by the seller for the amount. Link with subpart DA
5: The link between this section and subpart DA
a: subsection (2)(a) supplements the general permission; the general limitations still apply:
b: subsections (3)(a) and (4) override the capital limitation; the general permission must still be satisfied and the other general limitations still apply. amount arrangement associated person business capital limitation deduction employee employment income general limitation general permission income year pay supplement time of the disposal 2004 No 35 s DC 9 Section DC 10 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DC 10(1)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DC 10(1)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DC 10(1)(c) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DC 10(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DC 10(2)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DC 10(2)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DC 10(3) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DC 10(3)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DC 10 list of defined terms time of the disposal inserted 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DC 10 list of defined terms time of the sale repealed 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DC 11: 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 disposal 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 pay 2004 No 35 s DC 10 Section DC 11(1)(d) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DC 12: Loans to employees under share purchase schemes
Section DC 12 repealed 29 March 2018 section 49 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DC 13: Criteria for approval of share purchase schemes: before period of restriction ends
Section DC 13 repealed 29 March 2018 section 49 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DC 14: Criteria for approval of share purchase schemes: when period of restriction ends
Section DC 14 repealed 29 March 2018 section 49 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DC 15: Some definitions
Section DC 15 repealed 29 March 2018 section 49 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
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 set out 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 2004 No 35 s DD 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 pay 2004 No 35 s DD 2
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 2004 No 35 s DD 3
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 17B CW 17C CW 17CB
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 2004 No 35 s DD 4 Section DD 4(3) heading substituted 6 October 2009 section 84(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DD 4(3)(a) substituted 6 October 2009 section 84(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DD 4(3)(a) amended 1 April 2015 section 51 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DD 4 list of defined terms amount inserted 6 October 2009 section 84(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 2004 No 35 s DD 5
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 2004 No 35 s DD 6
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 2004 No 35 s DD 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 2004 No 35 s DD 8
DD 9: Relationship with fringe benefit tax rules
Sections DD 2 to DD 8 section CX 29
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 2004 No 35 s DD 9
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 17 CW 17B CW 17C CW 17CB
b: if a person incurs expenditure that relates only partly to the entertainment, the expenditure must be apportioned appropriately. employee exempt income pay 2004 No 35 s DD 10 Section DD 10(a) amended 1 April 2015 section 52 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DD 10(a) amended 6 October 2009 section 85 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
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 premises associated person business business contacts business premises shareholder 2004 No 35 s DD 11 Section DD 11 business premises repealed 31 March 2023 section 39 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
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, unless the company is a close company to which section CX 17(4B)(b) and (c)
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. Application of subpart to close companies
3: When this subpart applies to a close company to which section CX 17(4B)(b) and (c) business use close company company fringe benefit income income from employment motor vehicle 2004 No 35 s DE 1 Section DE 1(2)(a) replaced 1 April 2017 section 72(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 1(3) heading inserted 1 April 2017 section 72(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 1(3) inserted 1 April 2017 section 72(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 1 list of defined terms close company inserted 1 April 2017 section 72(3) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017
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:
ab: interest on amounts used to fund, directly or indirectly, expenditure the person incurs for the business use of a motor vehicle, if the person is a close company that has chosen to apply this subpart instead of the FBT rules, in accordance with section CX 17(4B)(c)
b: an amount of depreciation loss for the business use of a motor vehicle. Costs method or kilometre rate method
1B: A person can choose under section DE 2B
a: under subsections (2) and (4) (the costs method
i: a deduction amount for expenditure, calculated under subsection (2); and
ii: a deduction amount for depreciation loss, calculated as described in subsection (4); or
b: by using the kilometre rate method described in section DE 12 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 × business proportion. Definition of item in formula
3: In the formula in subsection (2), business proportion sections DE 3 to DE 11 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) applies; or
b: using the formula in subsection (8) if that subsection applies to the amount of depreciation loss; or
c: using the formula in subsection (11) if that subsection applies to the amount of depreciation loss. Calculation of deduction: depreciation loss generally
5: The formula referred to in subsection (4)(a) is— standard calculation × business proportion. Definition of items in formula
6: In the formula in subsection (5),—
a: standard calculation section EE 16
b: business proportion sections DE 3 to DE 11 When subsection (8) applies
7: Subsection (8) applies when—
a: the amount of depreciation loss results from a calculation made for the motor vehicle under section EE 48(2)
b: the person’s amount of depreciation loss for the motor vehicle was, at a time when the person owned it, calculated under subsection (5). Calculation of deduction: depreciation loss on disposal
8: The formula referred to in subsection (4)(b) is— disposal depreciation loss × all deductions ÷ (base value − adjusted tax value). Definition of items in formula
9: In the formula in subsection (8),—
a: disposal depreciation loss section EE 48(2)
b: all deductions
c: base value sections EE 57 to EE 60
d: adjusted tax value When subsection (11) applies
10: Subsection (11) applies when—
a: the amount of depreciation loss results from a calculation made for the motor vehicle under section EE 48(2)
b: the motor vehicle starts to have a business use in the same income year as that in which the amount of depreciation loss arose. Calculation of deduction: depreciation loss on disposal after business use
11: The formula referred to in subsection (4)(c) is— disposal depreciation loss × business proportion. Definition of items in formula
12: In the formula in subsection (11),—
a: disposal depreciation loss section EE 48(2)
b: business proportion sections DE 3 to DE 11 Link with subpart DA
13: 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 2004 No 35 s DE 2 Section DE 2(1)(ab) inserted 1 April 2017 section 73(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 2(1B) heading inserted 1 April 2017 section 73(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 2(1B) inserted 1 April 2017 section 73(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 2(3) amended 1 April 2017 section 73(3) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 2(6)(b) amended 1 April 2017 section 73(4) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 2(12)(b) amended 1 April 2017 section 73(5) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017
DE 2B: Election to use kilometre rate method or costs method
Election to use kilometre rate method
1: A person may, in their return of income for an income year, choose to apply the kilometre rate method described in section DE 12
a: 1 April 2017, unless the person disposes of the motor vehicle in that income year:
b: the day on which they acquire the motor vehicle:
c: the day on which they first start using the motor vehicle for business purposes. Election to use costs method
2: If a person does not make an election under subsection (1) Election cannot be revoked
3: An election made under subsection (1) or (2) in relation to a particular motor vehicle cannot be revoked, and applies for all subsequent income years until the end of the income year that includes the day on which the person disposes of the motor vehicle. business business use deduction income year motor vehicle return of income Section DE 2B inserted 1 April 2017 section 74 Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017
DE 3: Methods for calculating proportion of business use
The 2 methods
a: actual records, see section DE 5
b: a logbook, see sections DE 6 to DE 11
c: business use motor vehicle 2004 No 35 s DE 3 Section DE 3 amended 1 April 2017 section 75(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 3(b) amended 1 April 2017 section 75(2) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 3(c) repealed 1 April 2017 section 75(3) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017
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 ; and
b: a period is not a term to which a proportion of business use of a motor vehicle established by a logbook applies ; and
c: the person has not elected to use the kilometre rate method for the motor vehicle. 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 2004 No 35 s DE 4 Section DE 4(1)(a) amended 26 June 2019 section 59(1) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section DE 4(1)(b) amended 26 June 2019 section 59(2) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section DE 4(1)(c) replaced 1 April 2017 section 76(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 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 use Commissioner logbook term motor vehicle 2004 No 35 s DE 5 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 2004 No 35 s DE 6
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 use Commissioner logbook term motor vehicle 2004 No 35 s DE 7
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 2004 No 35 s DE 8
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 use Commissioner income year logbook term motor vehicle 2004 No 35 s DE 9
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 percentage points business use logbook term motor vehicle 2004 No 35 s DE 10 Section DE 10 amended 21 December 2010 section 41(1) Taxation (GST and Remedial Matters) Act 2010
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 use income year logbook term motor vehicle 2004 No 35 s DE 11 Kilometre rates Heading replaced 1 April 2017 section 77(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017
DE 12: Kilometre rate method
When this section applies
1: This section applies for the purposes of calculating a deduction for the business use of a motor vehicle under section DE 2(1) section DE 2B Amount of deduction
2: The amount of the deduction allowed for the business use of the vehicle in an income year is the sum of the amounts calculated under the following formula for each applicable kilometre rate for the vehicle for the income year: kilometre rate × kilometres travelled × business proportion. Definition of items in formula
3: In the formula,—
a: kilometre rate
b: kilometres travelled
c: business proportion sections DE 5 to DE 11 Setting kilometre rates
4: For the purposes of this section, the Commissioner must from time to time set Secondary legislation
5: An instrument that sets kilometre rates under subsection (4) is secondary legislation ( see Part 3 amount business business use Commissioner deduction income year motor vehicle The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication The maker must publish it LA19 ss 73 74(1)(a) cl 14 Presentation It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section DE 12 replaced 1 April 2017 section 77(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DE 12(4) amended 28 October 2021 section 3 Secondary Legislation Act 2021 Section DE 12(5) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section DE 12(5) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
DF: Government grants
, funding, Subpart DF heading amended 6 October 2009 section 86 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Contents
DF 1: Government grants to businesses
When this section applies
1: This section applies when—
a: a local authority , a public authority, or a public purpose Crown-controlled company
b: the payment—
i: is in the nature of a grant or subsidy to the person; or
ii: is a grant-related suspensory loan to the person; and
c: the payment is not in the nature of an advance or loan other than a grant-related suspensory loan; and
cb: the payment is not an amount of a loan under the small business cashflow scheme under section 7AA
cc: the payment is not an amount of a loan made under the research and development loan scheme; and
d: the person does not make an election that section CX 47(4) When this section does not apply
1BA: This section does not apply to the extent to which a payment described in subsection (1) is—
a: the payment of an R&D loss tax credit and the person’s expenditure is attributable to that payment:
b: an RDTI transition support payment and the person’s expenditure is attributable to that payment. When subsection (2) applies
1B: Subsection (2) applies when, in the absence of this section, the person would be allowed a deduction for expenditure by the person to which the payment by the local authority, public authority, or public purpose Crown-controlled company 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 in the absence of this section. When subsection (4) applies
3: Subsection (4) applies when—
a: expenditure by the person in the acquisition, construction, installation, or extension of an item of depreciable property is expenditure to which the payment by the local authority, public authority, or public purpose Crown-controlled company
b: in the absence of this section, the person would be allowed a deduction for an amount of depreciation loss for the item of depreciable property. 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: 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 local authority pay public authority public purpose Crown-controlled company R&D loss tax credit research and development loan scheme small business cashflow scheme time bar 2004 No 35 s DF 1 Section DF 1(1) heading substituted 21 December 2010 section 42(1) Taxation (GST and Remedial Matters) Act 2010 Section DF 1(1) substituted 21 December 2010 section 42(1) Taxation (GST and Remedial Matters) Act 2010 Section DF 1(1)(a) amended 31 March 2023 section 40(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DF 1(1)(cb) inserted 30 April 2020 section 5(1) COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 Section DF 1(1)(cc) inserted 6 August 2020 section 3 COVID-19 Response (Further Management Measures) Legislation Act (No 2) 2020 Section DF 1(1BA) heading inserted 24 February 2016 section 100(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DF 1(1BA) replaced 30 March 2022 section 69(1) section 69(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section DF 1(1B) heading inserted 21 December 2010 section 42(1) Taxation (GST and Remedial Matters) Act 2010 Section DF 1(1B) inserted 21 December 2010 section 42(1) Taxation (GST and Remedial Matters) Act 2010 Section DF 1(1B) amended 31 March 2023 section 40(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DF 1(3) substituted 21 December 2010 section 42(2) Taxation (GST and Remedial Matters) Act 2010 Section DF 1(3)(a) amended 31 March 2023 section 40(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DF 1(6) heading repealed 6 October 2009 section 87(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DF 1(6) repealed 6 October 2009 section 87(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DF 1 list of defined terms large budget screen production grant repealed 6 October 2009 section 87(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DF 1 list of defined terms public purpose Crown-controlled company inserted 31 March 2023 section 40(4) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DF 1 list of defined terms R&D loss tax credit inserted 24 February 2016 section 100(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DF 1 list of defined terms research and development loan scheme inserted 6 August 2020 section 3 COVID-19 Response (Further Management Measures) Legislation Act (No 2) 2020 Section DF 1 list of defined terms small business cashflow scheme inserted 30 April 2020 section 5(2) COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020
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) and (4)
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) and (4) 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 pay supplement 2004 No 35 s DF 2
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 pay 2004 No 35 s DF 3
DF 4: Payments for social rehabilitation
When this section applies
1: This section applies when—
a: a person is paid a personal service rehabilitation payment under the Accident Compensation Act 2001
i: for an income year; or
ii: as a reimbursement payment, in a later income year; and
b: the amount is assessable income of the person. Deduction
2: The person is allowed a deduction for an amount calculated using the formula— amount paid ÷ (1 − tax rate). Definition
3: In the formula,—
a: amount paid
i: for a key aspect of social rehabilitation provided to them for the income year or for an earlier income year; and
ii: to the extent to which the amount is less than the amount of personal service rehabilitation payment paid to them, after taking into account any amount of tax withheld:
b: tax rate section RD 10B Link with subpart DA
4: 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. amount amount of tax assessable income capital limitation general limitation general permission income year pay personal service rehabilitation payment private limitation reimbursement payment tax 2004 No 35 s DF 4 Section DF 4 substituted 1 July 2008 section 343 Taxation (Business Taxation and Remedial Matters) Act 2007 Section DF 4(1) replaced 18 March 2019 section 153(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section DF 4(3) heading amended 29 August 2011 section 140(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DF 4(3)(a) replaced 18 March 2019 section 153(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section DF 4(3)(b) replaced 1 April 2017 section 78 Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section DF 4 list of defined terms reimbursement payment inserted 18 March 2019 section 153(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
DF 5: Government funding additional to government screen production payments
When this section applies
1: This section applies when a public authority makes a payment (the funding payment
a: the funding payment is not in the nature of a grant or subsidy; and
b: the funding payment is not a grant-related suspensory loan; and
c: the person receives a government screen production payment for the project in addition to the funding payment; and
d: the person would be allowed a deduction for the expenditure in the absence of this section; and
e: the payment is excluded income under section CX 48C No deduction for expenditure
2: The person is denied, to the extent of the amount of the funding payment, the deduction for the expenditure that would be allowed in the absence of this section. Deduction for payments to public authority
3: The person is allowed a deduction for the amount of a payment (the return payment Links with subpart DA
4: In this section—
a: subsection (2) overrides the general permission; and
b: subsection (3) supplements the general permission and overrides the capital limitation; the other general limitations still apply. capital limitation deduction excluded income general limitation general permission government screen production payment grant-related suspensory loan pay public authority Section DF 5 added 6 October 2009 section 89 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DG: Expenditure related to use of certain assets
Subpart DG inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Contents
Introductory provisions Heading inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 1: What this subpart does
This subpart sets out the rules for the deductibility and apportionment of expenditure incurred for an income year in relation to an asset when the asset is used partly for income-earning purposes and partly for private purposes, and for a time during the income year, the asset is not in use. asset deduction income income year Section DG 1 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 2: Application of this subpart
Asset by asset
1: The rules in this subpart apply on an asset by asset basis. Relationship with sections DB 5, DB 7, and DB 8
2: The rules in this subpart override sections DB 5 DB 7 DB 8 Relationship with subpart DD
3: Subpart DD Relationship with subpart DH
3B: Relationship with FBT rules and dividend rules
4: No liability to pay fringe benefit tax arises from the private use of an asset to which this subpart applies. In circumstances where section CX 17 Application to groups of and interests in companies
5: For the purposes of this subpart,—
a: a group of companies is treated as a wholly-owned group of companies:
b: a voting interest in a company includes a market value interest when a market value circumstance exists for the company. Rules for identifying voting and market value interests
6: In this subpart,—
a: for the purposes of determining the extent to which a company ( company A company B section YC 4
b: for the purposes of determining the extent to which company A has a voting interest or market value interest of more than 10% in an associated company, the look-through rule in section YC 4
c: a zero voting interest is not a voting interest, and a zero market value interest is not a market value interest. asset associated company deduction dividend fringe benefit tax group of companies market value circumstance market value interest private use voting interest wholly-owned group of companies Section DG 2 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 2(3B) heading repealed 1 April 2025 section 41 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DG 2(3B) repealed 1 April 2025 section 41 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DG 3: Meaning of asset for this subpart
Meaning of asset
1: For the purposes of this subpart, an asset
a: is used by the person in the income year partly to derive income and partly for private use; and
b: is not in use—
i: for at least 62 days in the income year; or
ii: when the asset is typically used only on working days, for at least 62 working days in the income year. What items of property?
2: Subsection (1) applies to an asset that, in the complete form in which the person uses it for income-earning purposes,—
a: is 1 of the following:
i: land, including improvements to land:
ii: a ship, boat, or craft used in navigation on or under water, whether or not it has a means of propulsion:
iii: an aircraft; and
b: for an item referred to in paragraph (a)(ii) and (iii), has—
i: a cost to the person of $50,000 or more; or
ii: a market value on the date of acquisition of the asset of $50,000 or more, if the asset was not acquired at market value; and
c: includes any related items, things, or accessories pertaining to the asset. Which persons?
3: A person excludes a company other than a close company Exclusions
4: Despite subsection (2), an asset is excluded from the operation of the rules in this subpart if—
a: the use of the asset meets the following criteria:
i: the private use of the asset is minor; and
ii: the main use of the asset is use in a business that is not a rental or charter business; and
iii: for a company or a trustee of a trust, the use of the asset places an obligation on the company or the trustee, as applicable, to pay fringe benefit tax or income tax:
b: the asset is a residential property and its only income-earning use is as a long-term rental property:
c: Meaning of market value
5: For the purposes of this subpart, other than subsection (2)(b)(ii), market value
a: in the open market; and
b: freely offered; and
c: made on ordinary terms; and
d: to a member of the public at arm's length. Partnerships and look-through companies
6: For the purposes of this section, if the asset is held through a partnership or a look-through company, the value of the interests in the asset held by all the partners in the partnership or all the shareholders in the look-through company, as applicable, is aggregated. What constitutes use
7: For the purposes of this subpart, the use of an asset is the active use of the asset for its intended purpose. Example
Graeme owns a yacht that he used with his family for a 4-week holiday. He also rented the yacht at market rates to other people who were not associates on 4 occasions, totalling 3 weeks. The cost of the yacht (including some capital improvements and items such as lifejackets and a dinghy) is $85,000. The rules in this subpart apply to Graeme. amount asset business close company company deduction fringe benefit tax income income tax income year land look-through company market value partnership private use shareholder tax trustee working day Section DG 3 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 3(3) amended 29 March 2018 section 258 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DG 3(4)(c) repealed 27 February 2014 section 35(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DG 4: Meaning of private use for this subpart
What is private use?
1: For the purposes of this subpart, private use
a: means the use of the asset by a person described in subsection (2), whether or not—
i: the use is exclusive:
ii: an amount of income is derived in relation to its use:
b: includes the use of an asset when income derived in relation to the use of the asset is an amount that is less than 80% of the market value amount:
c: excludes the use of the asset referred to in subsections (3) to (5). Use by natural persons
2: The person referred to in subsection (1)(a) is a natural person who—
a: owns, leases, licenses, or otherwise has the asset:
b: is associated with a person who owns, leases, licenses, or otherwise has the asset. Ordinary business use
3: The use of an asset is not private use if—
a: the asset is used to derive income for a particular period; and
b: during the period, use of the asset by the person is limited to:
i: use in the ordinary course of business:
ii: deriving the person’s employment income. Repairs
4: The use of an asset is not private use if—
a: the asset is used to derive income for a particular period; and
b: damage is caused to the asset during the period; and
c: the damage is not the result of ordinary wear and tear; and
d: the person uses the asset after the end of the period to repair the damage; and
e: the use of the asset referred to in paragraph (d) is necessary in order for the person to carry out the repairs. Relocation expenses
5: The use of an asset is not private use if—
a: the asset is used to derive income for a particular period in an income year; and
b: the person uses the asset before the start of the period, or after the end of the period, or both, to relocate the asset; and
c: the use referred to in paragraph (b) and the relocation of the asset are necessary for the income-earning purposes; and
d: the income the person derives for the income year from the use of the asset includes an amount payable for the cost of relocation. Exempt income
6: Subsections (3) to (5) do not apply if the person derives an amount of exempt income in relation to the use of the asset. For the treatment of certain amounts of income derived from the use of assets as described in this section, see section CW 8B Example
Mary owns a launch. During the course of an income year, she takes her family out on the launch, she lets her brother use the launch (paying the market rate of $200 per day) and she lets her friend use the launch (paying fuel costs only at the rate of $50 per day). All these uses are instances of private use. When Mary rents out the launch to non-associates at market rates, takes the launch to another port for rental to non-associates at $250 per day and then back again to the home port, or takes the launch to a boatyard for repair after damage was caused by a non-associate during a rental period, none of these instances is private use. amount asset associated person business exempt income income lease market value pay private use Section DG 4 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 4(2) replaced 24 February 2016 section 101(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 4(3) replaced 24 February 2016 section 101(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DG 5: Meaning and treatment of interest expenditure for this subpart
Interest expenditure
1: In this subpart, interest expenditure
a: provides funds to the person; and
b: gives rise to an amount for which the person would have a deduction. Apportionment
2: For the purposes of this subpart,—
a: if the person is not a company, an amount of interest expenditure incurred in relation to an asset is included in the item expenditure section DG 9(3)(a)
b: if the person is a company other than a qualifying company, an amount of interest expenditure incurred in relation to an asset is apportioned under section DG 11
c: if the person is a qualifying company, they are treated for the purposes of this subpart as a person that is not a company.
d: Exchange rate fluctuations
3: Interest expenditure does not include a deduction for an amount that arises only from movement in currency exchange rates. amount asset company deduction financial arrangement interest interest expenditure qualifying company Section DG 5 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 5(2)(d) repealed 1 April 2025 section 42(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DG 5 list of defined terms beneficiary repealed 1 April 2025 section 42(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DG 5 list of defined terms disallowed residential property repealed 1 April 2025 section 42(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DG 5 list of defined terms interposed residential property holder repealed 1 April 2025 section 42(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DG 6: Associated persons: company rule modified
Despite section YB 3(1) (Company and person other than company)
a:
b: the person's share in the company gives them a right to use the asset. asset associated person company share Section DG 6 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 6 amended 30 June 2014 section 53(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DG 6(a) repealed 30 June 2014 section 53(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DG 6 list of defined terms voting interest repealed 30 June 2014 section 53(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 When assets held simply Heading inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 7: Expenditure related to income-earning use
Expenditure on certain business and regulatory requirements
1: A person is allowed a deduction for expenditure or loss, including an amount of depreciation loss, to the extent to which the amount incurred—
a: relates solely to the use of an asset for deriving income of the person, other than exempt income; and
b: is expenditure—
i: from which the person would not reasonably expect to receive a personal benefit, or for a company, an associate of the person:
ii: that the person must reasonably incur to meet a regulatory requirement so that they may use the asset for deriving income and that would not have been incurred but for the requirement. Expenditure that must be apportioned
2: Despite subsection (1) and for the avoidance of doubt, all expenditure on repairs and maintenance incurred in relation to an asset must be treated as expenditure that is limited under section DG 8 section DG 4(4) Example
John operates a charter boat which he also uses privately. He incurs expenses including costs in meeting Maritime New Zealand survey requirements, advertising costs, and general maintenance costs. The advertising costs are fully deductible because they deliver no personal benefit. The survey costs are fully deductible if they are incurred only for charter purposes. The maintenance costs are not deductible under this provision because they deliver a personal benefit as well as an income-earning benefit. A portion of these maintenance costs may be allowed as a deduction under section DG 8. amount asset associated person company deduction depreciation loss exempt income income Section DG 7 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 8: Expenditure limitation rule
Limited deduction
1: A person is allowed a deduction for expenditure or loss, including an amount of depreciation loss, that they incur in relation to the income-earning use of an asset to the extent of the amount calculated using the formula in section DG 9(2) Depreciation recovery and loss on disposal
2: In the treatment of assets generally,—
a: if some or all of the expenditure on an asset is apportioned for tax purposes on the basis of space, floor area, or on another similar basis, that method of apportionment overrides the rules in this subpart to the extent of the amount of the deduction:
b: depreciation recovery income on disposal is dealt with in section EE 49
c: depreciation loss on disposal is dealt with in sections EE 44 to EE 48 EE 50(6) and (7) Relationship with other sections
3: This section—
a: supplements the general permission and overrides the capital limitation and the private limitation, but the other limitations still apply:
b: overrides section EE 50(2) amount asset capital limitation deduction depreciation loss depreciation recovery income general permission private limitation Section DG 8 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 9: Apportionment formula
What this section does
1: This section provides the formula for use where it is referred to section DG 8 Formula
2: The apportionment formula is— expenditure × income-earning days ÷ (income-earning days + counted days). Definition of items in formula
3: In the formula,—
a: expenditure
i: the income-earning use of the asset as described in section DG 7
ii: the private use of the asset:
iii: a use of the asset for which the expenditure is of a capital nature:
b: income-earning days
i: the use made of the asset is use described in section DG 4(3) to (5)
ii: the asset has become unavailable for use because another person who had earlier reserved the asset for their own use, subsequently did not take advantage of that reservation:
iii: a fringe benefit tax liability arises:
c: counted days Other units of measurement
4: A unit of measurement of time other than days, whether relating to hours, or nights, or anything else, is to be used in the formula and in subsection (3)(b) and (c), if it achieves a more appropriate apportionment. For this purpose, the same unit must be used in relation to both items in subsection (3)(b) and (c). Example
Jim rents out his aeroplane at market value for 100 hours in an income year, and uses it for his personal enjoyment for 50 hours. Jim incurs expenditure of $10,000 for general repairs and maintenance of the plane. He may deduct two-thirds of the expenditure (section DG 9(2)). The formula is $10,000 × (100/(100 + 50)) = $6,666.67. amount asset deduction exempt income fringe benefit tax income income year market value private use Section DG 9 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 9(1) amended 30 March 2022 section 71 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section DG 9(1) amended 24 February 2016 section 102(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 9(3)(a) replaced 30 June 2014 section 54(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DG 9(3)(a)(iii) replaced 24 February 2016 section 102(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 9(3)(b) amended 30 June 2014 section 54(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 When assets held in corporate structures Heading inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 10: Interest expenditure rules
Groups of companies
1: Sections DG 11 to DG 14 section 30D Relationship with subpart DH
1B: Exclusions: group companies
2: A company ( company A sections DG 11 to DG 14
a: no private use of an asset of a company in the group has been made in the income year by a shareholder of company A:
b: no tax losses have been made available under subpart IC Exclusion: corporate shareholders
3: Section DG 13
a: the shareholder has a direct or indirect interest of less than 50% in the company that has the asset; and
b: the shareholder has not enjoyed any private use of the asset. Exclusion: non-corporate shareholders
4: Section DG 14
a: the shareholder has a direct or indirect interest of less than 50% in the company that has the asset; and
b: the shareholder has not enjoyed any private use of the asset. Treatment of qualifying companies
5: The interest expenditure rules apply to a qualifying company in the following way:
a: the company is treated as if section DG 11(3)
b: sections DG 12 to DG 14 Associated persons
6: For the purposes of subsections (2), (3), and (4), a reference to a shareholder includes a person associated with the shareholder, unless the associated person is also a shareholder. amount asset associated person company deduction group of companies income year interest expenditure net asset balance private use qualifying company shareholder tax loss wholly-owned group Section DG 10 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 10(1B) heading repealed 1 April 2025 section 43(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DG 10(1B) repealed 1 April 2025 section 43(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DG 10 list of defined terms beneficiary repealed 1 April 2025 section 43(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DG 10 list of defined terms disallowed residential property repealed 1 April 2025 section 43(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DG 10 list of defined terms interposed residential property holder repealed 1 April 2025 section 43(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DG 11: Interest expenditure: close companies
What this section does
1: This section quantifies the amount of a deduction that a close company is allowed for an income year when—
a: the company has an asset to which this subpart applies; and
b: the company incurs interest expenditure for the income year. Determining values and deductions
2: The company must first determine the amount of its debt value and its asset value for the income year, and then apply either subsection (3) or subsections (4) to (6). Debt value less than asset value
3: If the debt value for the income year is equal to or less than the asset value for the income year, the company is allowed a deduction for interest expenditure incurred for the income year of an amount calculated using the formula in subsection (3B). Formula
3B: The formula is— interest expenditure × (income-earning days + capital-use days) Definition of items in formula
3C: In the formula in subsection (3B),—
a: interest expenditure
b: income-earning days
i: the use of the asset is described in section DG 4(3) to (5)
ii: the asset has become unavailable for use because another person who had earlier reserved the asset for their own use, subsequently did not take advantage of that reservation:
iii: a fringe benefit tax liability arises:
c: capital-use days
d: counted days Debt value more than asset value
4: If the debt value for the income year is more than the asset value for the income year, the company must calculate a reduced amount of interest expenditure for the income year using the formula— interest expenditure × company’s asset value ÷ company’s debt value. Definition of items in formula
5: In the formula in subsection (4)
a: interest expenditure
b: company's asset value
c: company's debt value Apportionment of reduced amounts
6: The company is allowed a deduction for the income year of a portion of the reduced amount described in subsection (4),—
a: of an amount calculated using the formula in subsection (3B)
b: treating the reduced amount as if it were the item interest expenditure Deductions for interest expenditure in excess of reduced amounts
6B: The company is allowed a deduction for the amount of interest expenditure calculated under subsection (6C) to the extent to which the amount would be a deduction under Part D Formula
6C: The formula is— interest expenditure − reduced amount. Definition of items in formula
6D: In the formula in subsection (6C),—
a: interest expenditure
b: reduced amount Net asset balance
7: When subsection (3) applies for an income year, the amount that remains outstanding after subtracting the debt value for the income year from the asset value for the income year (the net asset balance sections DG 12 to DG 14 Meaning of asset value
8: For the purposes of this subpart, asset value
a: for land, including an improvement to land, the amount given under subsection (8B):
b: for other property, its adjusted tax value. Asset value for land, including improvements to land
8B: For the purposes of subsection (8)(a), the asset value is the following amount, as applicable:
a: the amount given by the later of either—
i: its most recent capital value or annual value as set by the relevant local authority; or
ii: its cost on acquisition or, if the transaction involves an associated person, its market value:
b: if the land or improvement to land is a leasehold estate in land, the market value of the leasehold estate which the person may establish by a valuation that is or has been made by a registered valuer no more than 3 years before the end of the income year:
c: if different activities are carried out on the land on a single record of title within the meaning of the Land Transfer Act 2017
i: by multiplying the value by the percentage that the area of land that is the portion of the land used in relation to the asset to which this subpart applies bears to the total land area described in the record of title
ii: by a valuation that is or has been made by a registered valuer no more than 3 years before the end of the income year, of the portion of land used in relation to the asset to which this subpart applies. Meaning of debt value
9: For the purposes of this subpart, debt value
a: means the average outstanding amount that gives rise to the interest payable by the company, measured by reference to the amounts outstanding at the start of and at the end of an income year; and
b: for a person who has, in the income year, more than 1 asset to which this subpart applies, is reduced in subsection (5)(c), sections DG 12(6)(c) DG 13(8)(c) Example
Holiday Home Ltd holds a holiday home with a rateable value of $200,000. The company has debt of $40,000, with associated interest expenditure of $4,000. Since the debt value is less than the asset value, all the interest expenditure must be apportioned (section DG 11(3)–(3C)). Boat Ltd has a charter boat whose adjusted tax value is $60,000. The company has debt of $100,000, with associated interest expenditure of $10,000. Since the debt value is more than the asset value, the company must apportion the interest expenditure of $6,000 (section DG 11(4)–(6)). The formula is $10,000 × ($60,000/$100,000) = $6,000. The remaining interest expenditure of $4,000 is not subject to apportionment under subpart DG and is allowed as a deduction under section DB 7 (section DG 11(6B)–(6D)). The formula is $10,000−$6,000 = $4,000. adjusted tax value amount asset asset value associated person close company cost debt value deduction income income year interest interest expenditure land market value net asset balance pay Section DG 11 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 11(1)(b) replaced 31 March 2023 section 42(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DG 11(3) replaced 24 February 2016 section 103(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(3B) heading inserted 24 February 2016 section 103(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(3B) inserted 24 February 2016 section 103(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(3C) heading inserted 24 February 2016 section 103(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(3C) inserted 24 February 2016 section 103(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(5) amended 24 February 2016 section 103(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(6)(a) amended 24 February 2016 section 103(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(6)(b) amended 24 February 2016 section 103(5) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(6B) heading inserted 24 February 2016 section 103(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(6B) inserted 24 February 2016 section 103(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(6C) heading inserted 24 February 2016 section 103(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(6C) inserted 24 February 2016 section 103(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(6D) heading inserted 24 February 2016 section 103(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(6D) inserted 24 February 2016 section 103(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11(8)(a) replaced 30 June 2014 section 55(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DG 11(8B) heading inserted 30 June 2014 section 55(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DG 11(8B) inserted 30 June 2014 section 55(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DG 11(8B)(c) amended 12 November 2018 section 250 Land Transfer Act 2017 Section DG 11(8B)(c)(i) amended 12 November 2018 section 250 Land Transfer Act 2017 Section DG 11 example replaced 24 February 2016 section 103(7) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 11 list of defined terms beneficiary repealed 31 March 2023 section 42(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DG 11 list of defined terms disallowed residential property repealed 31 March 2023 section 42(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DG 11 list of defined terms interposed residential property holder repealed 31 March 2023 section 42(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
DG 12: Interest expenditure: group companies
When this section applies
1: This section applies for an income year when—
a: a close company or a qualifying company ( company A
b: company A is part of the same group of companies as another company ( company B
c: company B has interest expenditure for which it is allowed a deduction. How this section applies: looping rule
2: This section applies sequentially to every group company B until—
a: the net asset balance for the income year is reduced to zero, or is treated as reduced to zero; or
b: no other group companies exist to which this section applies. Debt value less than net asset balance
3: If company B's debt value for the income year is equal to or less than the net asset balance for the income year, company B is allowed a deduction of a portion of interest expenditure incurred for the income year,—
a: of an amount calculated by company A using the formula in section DG 11(3B)
b: treating company B's total interest expenditure for the income year as if it were the item interest expenditure Recalculation of net asset balance
4: In the application of subsection (3), the amount of the net asset balance must be recalculated on each application, being reduced by an amount equal to each counted group company's debt value. Debt value more than net asset balance
5: If company B's debt value for the income year is more than the net asset balance for the income year, company B must calculate a reduced amount of interest expenditure for the income year using the formula— interest expenditure × net asset balance ÷ company B’s debt value. Definition of items in formula
6: In the formula in subsection (5)
a: interest expenditure
b: net asset balance
c: company B's debt value Apportionment of reduced amounts
7: Company B is allowed a deduction for the income year of a portion of the reduced amount described in subsection (5),—
a: of an amount calculated by company A using the formula in section DG 11(3B)
b: treating the reduced amount as if it were the item interest expenditure Deductions for interest expenditure in excess of reduced amounts
7B: Company B is allowed a deduction for the amount of interest expenditure calculated under subsection (7C) to the extent to which the amount would be a deduction under Part D Formula
7C: The amount of interest expenditure is calculated using the formula— interest expenditure − reduced amount. Definition of items in formula
7D: In the formula in subsection (7C),—
a: interest expenditure
b: reduced amount Net asset balance zero
8: Once a calculation is made under subsection (5), company B's net asset balance is treated as zero. Net asset balance
9: If a net asset balance remains outstanding after the application of this section for an income year, the amount must be used under sections DG 13 DG 14 Example
Holiday Home Ltd has an asset balance of $160,000 ($200,000 less $40,000) and is wholly owned by Parent Ltd. Parent has debt of $30,000, with associated interest expenditure of $3,000. Since Parent's debt value is less than the asset balance, all of Parent's interest expenditure must be apportioned (section DG 12(3)). amount asset value close company company debt value deduction group of companies income year interest expenditure net asset balance qualifying company Section DG 12 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 12(3)(a) amended 24 February 2016 section 104(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 12(3)(b) amended 24 February 2016 section 104(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 12(6) amended 24 February 2016 section 104(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 12(7)(a) amended 24 February 2016 section 104(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 12(7)(b) amended 24 February 2016 section 104(5) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 12(7B) heading inserted 24 February 2016 section 104(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 12(7B) inserted 24 February 2016 section 104(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 12(7C) heading inserted 24 February 2016 section 104(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 12(7C) inserted 24 February 2016 section 104(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 12(7D) heading inserted 24 February 2016 section 104(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 12(7D) inserted 24 February 2016 section 104(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DG 13: Interest expenditure: corporate shareholders
When this section applies
1: This section applies to a company that is not in the same group of companies as another company ( company A
a: a net asset balance remains outstanding for an income year after the application of—
i: first, section DG 12
ii: secondly, section DG 11
b: the company is 1 or more of—
i: a company that is a shareholder in company A:
ii: a company that is a shareholder in a company that is part of the same group of companies as company A and has a voting interest in company A:
iii: a company that has a voting interest in a company referred to in subparagraph (i) or (ii). How this section applies: looping rule
2: This section applies sequentially as follows:
a: first, to the companies referred to in subsection (1)(b)(i) and (ii); and
b: secondly, to the extent to which the debt value of the company for the income year remains less than the company's share of the net asset balance, to the companies that are shareholders in a company referred to in paragraph (a); and
c: so on, until either—
i: the company's share of the net asset balance for the income year is reduced to zero or is treated as reduced to zero; or
ii: no other corporate shareholders exist to which this section applies. Limitation by share in asset balance
3: The deduction that the company is allowed for interest expenditure incurred for the income year is limited by its share of the net asset balance. The share of the asset balance is calculated using the formula— net asset balance × company’s interest. Definition of items in formula
4: In the formula in subsection (3),—
a: net asset balance section DG 11 DG 12
b: company's interest Debt value less than asset balance
5: If the debt value for the company for the income year is equal to or less than its share of the net asset balance for the income year, the company is allowed a deduction of a portion of interest expenditure incurred for the income year,—
a: of an amount calculated by company A using the formula in section DG 11(3B)
b: treating the total interest expenditure for the income year as if it were the item interest expenditure Recalculation of asset balance
6: In the application of subsection (5), the amount that is the company's share of the net asset balance must be recalculated on each application, being reduced by an amount equal to each counted company's debt value. Debt value more than asset balance
7: If the debt value for the company for the income year is more than its share of the net asset balance, the company must calculate a reduced amount of interest expenditure incurred for the income year using the formula— interest expenditure × company’s share of net asset balance Definition of items in formula
8: In the formula in subsection (7),—
a: interest expenditure
b: company's share of net asset balance
c: company's debt value Apportionment of reduced amounts
9: The company is allowed a deduction for the income year of a portion of the reduced amount described in subsection (7),—
a: of an amount calculated by company A using the formula in section DG 11(3B)
b: treating the reduced amount as if it were the item interest expenditure Deductions for interest expenditure in excess of reduced amounts
9B: The company is allowed a deduction for the amount of interest expenditure calculated under subsection (9C) to the extent to which the amount would be a deduction under Part D Formula
9C: The formula is— interest expenditure − reduced amount. Definition of items in formula
9D: In the formula in subsection (9C),—
a: interest expenditure
b: reduced amount Net asset balance zero
10: Once a calculation is made under subsection (7), the amount that is the company's share of the net asset balance is treated as zero. Net asset balance
11: If a net asset balance remains outstanding after the application of this section for an income year, the amount must be used under section DG 14 Example
Parent Ltd has 2 equal corporate shareholders, company Y, which has debt of $20,000 with associated interest expenditure of $2,000, and company Z, which has debt of $70,000 with associated interest expenditure of $7,000. Both companies' share of the net asset balance is $65,000 ($130,000 × 50%). Since company Y's debt value is less than its share of the net asset balance, all its interest expenditure must be apportioned (section DG 13(5)). Company Z's debt value is greater than its share of the net asset balance, so it must apportion interest expenditure of $6,500 (section DG 13(7)–(9)). The formula is $7,000 × ($65,000/$70,000) = $6,500. amount company debt value deduction group of companies income year interest expenditure net asset balance shareholder voting interest Section DG 13 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 13(1) amended 24 February 2016 section 105(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(1)(b) amended 24 February 2016 section 105(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(5)(a) amended 24 February 2016 section 105(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(5)(b) amended 24 February 2016 section 105(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(9)(a) amended 24 February 2016 section 105(5) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(9)(b) amended 24 February 2016 section 105(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(9B) heading inserted 24 February 2016 section 105(7) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(9B) inserted 24 February 2016 section 105(7) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(9C) heading inserted 24 February 2016 section 105(7) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(9C) inserted 24 February 2016 section 105(7) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(9D) heading inserted 24 February 2016 section 105(7) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 13(9D) inserted 24 February 2016 section 105(7) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DG 14: Interest expenditure: non-corporate shareholders
When this section applies
1: This section applies for a person, for an income year and a company ( company A
a: a net asset balance remains outstanding for an income year after the application of—
i: first, section DG 13
ii: secondly, section DG 12
iii: thirdly, section DG 11
b: the person—
i: is not a company
ii: has a voting interest in company A; and
iii: has interest expenditure for which they are allowed a deduction. Amount to be apportioned
2: For a natural person, the amount of interest expenditure that must be apportioned is only the amount of interest that the person incurs on money borrowed to acquire shares in company A or in a company referred to in section DG 13(1)(b) Method of apportionment
3: The apportionment is made using the rules set out in section DG 13(2) to (10) Relationship with subpart DH
4: Example
Company Y has 2 shareholders: Thomas, who has borrowed $200,000 to acquire a 50% interest in the company, and Brent, who has borrowed $10,000 to buy his 50% interest. Each has a share of the remaining net asset balance of $22,500. The formula is ($65,000 − $20,000) × 50% = $22,500. Since Thomas's debt value is greater than his share of the net asset balance, Thomas must apportion 11.25% of his total interest expenditure (sections DG 14 and DG 13(7)–(9)). The formula is 22,500/200,000. Since Brent's debt value is less than his share of the net asset balance, all Brent's interest expenditure must be apportioned (sections DG 14 and DG 13(5)). amount company deduction income year interest interest expenditure net asset balance share voting interest Section DG 14 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 14(1) amended 24 February 2016 section 106(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 14(1)(b) amended 24 February 2016 section 106(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 14(1)(b)(i) amended 29 March 2018 section 258 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DG 14(4) heading repealed 1 April 2025 section 44 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DG 14(4) repealed 1 April 2025 section 44 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DG 14 list of defined terms trustee repealed 29 March 2018 section 258 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Quarantined expenditure Heading inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 15: Quarantined expenditure rules
Sections DG 16 DG 18 sections DG 7 DG 8 DG 11 to DG 14 Sections DG 17 DG 19 section 30D amount asset company deduction income income year Section DG 15 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 16: Quarantined expenditure when asset activity negative
When this section applies
1: This section applies when—
a: a person incurs expenditure or loss section DG 7 DG 8 DG 11
b: the amount of income derived for the income year from the use of an asset, other than an amount of exempt income, is less than 2% of—
i: for land, including an improvement to land, the amount given under subsection (1B):
ii: for other property to which this subpart applies, its adjusted tax value. Amount for land, including improvements to land
1B: For the purposes of subsection (1)(b)(i), the amount is the following amount, as applicable:
a: the amount given by the later of either—
i: its most recent capital value or annual value as set by the relevant local authority; or
ii: its cost on acquisition or, if the transaction involves an associated person, its market value:
b: if the land or improvement to land is a leasehold estate in land, the market value of the leasehold estate which the person may establish by a valuation that is or has been made by a registered valuer no more than 3 years before the end of the income year:
c: if different activities are carried out on the land on a single record of title within the meaning of the Land Transfer Act 2017
i: by multiplying the value by the percentage that the area of land that is the portion of the land used in relation to the asset to which this subpart applies bears to the total land area described in the record of title
ii: by a valuation that is or has been made by a registered valuer no more than 3 years before the end of the income year, of the portion of land used in relation to the asset to which this subpart applies. Quarantined amount
2: The amount of the person's excess expenditure for the income year is calculated using the formula— expenditure − asset income. Definition of items in formula
3: In the formula,—
a: expenditure
i: the total amount of deductions that the person is allowed for the income year under sections DG 7 DG 8 DG 11
ii: an amount of the person that was quarantined under this section for an earlier income year and is not yet allocated to an income year:
b: asset income No deduction for quarantined amount
4: The excess expenditure calculated under subsection (2) is quarantined and denied as a deduction for the income year. Outstanding profit balance
5: If the amount of expenditure for the income year is less than the amount of income for the income year, the excess income is the outstanding profit balance section DG 18 Zero result
6: For the purposes of the formula in subsection (2), if the amount of income for the income year is greater than the amount of expenditure for the income year, the result of the formula is treated as zero. Example
David has a city apartment with a rateable value of $300,000. He rents out the apartment and also uses it privately. He receives market rate rental of $4,000 from non-associates, and $6,000 from associates. David's total allowable expenditure, under sections DG 7, DG 8, and DG 11, is $15,000. The income from associates is exempt under section CW 8B, and is ignored. David therefore has asset income of $4,000 and deductions of $15,000, giving rise to an excess of expenditure over income of $11,000. the excess expenditure of $11,000 adjusted tax value amount asset associated person cost deduction exempt income income income year land market value Section DG 16 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 16(1)(a) amended 24 February 2016 section 107(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DG 16(1)(b)(i) replaced 30 June 2014 section 56(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DG 16(1B) heading inserted section 56(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DG 16(1B) inserted section 56(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DG 16(1B)(c) amended 12 November 2018 section 250 Land Transfer Act 2017 Section DG 16(1B)(c)(i) amended 12 November 2018 section 250 Land Transfer Act 2017 Section DG 16 example amended 30 June 2014 section 59 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DG 17: Allocation of amounts quarantined under section DG 16
When this section applies
1: This section applies for an income year (the current year
a: a person has an amount of excess expenditure quarantined under section DG 16
b: the person's income for the current year from the use of the asset is more than the amount of their deductions under sections DG 7 DG 8 DG 11 Deduction and allocation
2: The amount of previously quarantined expenditure that the person is allowed as a deduction for the current year must not be more than the lesser of—
a: the amount referred to in subsection (1)(a):
b: the amount calculated using the formula— asset income − expenditure. Definition of items in formula
3: In the formula,—
a: asset income total amount of income, other than an amount of exempt income, derived
b: expenditure sections DG 7 DG 8 DG 11 Outstanding profit balance
4: If the lesser amount in subsection (2) is the quarantined amount referred to in subsection (2)(a), an outstanding profit balance arises of an amount that is the difference between the amount of income for the current year and the amount of expenditure for the current year, including the quarantined amount allocated to the current year. The outstanding profit balance is available for use under section DG 19 Zero result
5: For the purposes of the formula in subsection (2), if the amount of expenditure for the current year is greater than the amount of income for the current year, the result of the formula is treated as zero. Modification for certain assets
6: For the purposes of subsection (1)(a), a quarantined amount that is related to an asset may be used in relation to another asset of the person if—
a: the first asset is damaged, destroyed, or lost, and is no longer held by the person; and
b: a second asset is acquired to replace the first asset; and
c: the 2 assets are identical or substantially the same. Example,
continued from section DG 16 In the following income year, David derives $10,000 from renting his city apartment at market rates to a non-associate. David's total allowable expenditure, under sections DG 7, DG 8, and DG 11, is $8,000. He also has expenditure of $11,000 remaining $9,000 amount asset deduction income income year Section DG 17 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 17(3)(a) amended 30 June 2014 section 57(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DG 17 example amended 30 June 2014 section 59 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DG 18: Quarantined expenditure: group companies and shareholders
When this section applies
1: This section applies when—
a: a person incurs expenditure for an income year for which they are allowed a deduction that is limited under 1 or more of sections DG 12 to DG 14
b: the income year is an income year in which section DG 16(1)(b) How this section applies: first looping rule
2: The first application of this section is to every group company B in sequence until no other group companies exist to which this subsection applies. How this section applies: second looping rule
3: The second application of this section is sequentially to—
a: first, 1 or more of the following persons, none of which is a company referred to in subsection (2):
i: a person who is a shareholder in company A:
ii: a person who is a shareholder in a company that is part of the same group of companies as company A and has a voting interest in company A; and
b: secondly, a person who is a shareholder in a company referred to in paragraph (a); and
c: so on, until no other persons exist to which this subsection applies. Quarantined amount
4: The amount of the person's excess expenditure for the income year is calculated using the formula— expenditure − outstanding profit balance. Definition of items in formula
5: In the formula,—
a: expenditure
i: the total amount of deductions that the person is allowed for the income year under sections DG 12 to DG 14
ii: an amount of the person that was quarantined under this section for an earlier income year and is not yet allocated to an income year:
b: outstanding profit balance
i: for company B, is the amount of the outstanding profit balance referred to in section DG 16(5)
ii: for a shareholder, is the amount that is the person's share of the outstanding profit balance referred to in section DG 16(5) section DG 13(3) No deduction for quarantined amount
6: The excess expenditure calculated under subsection (4) is either quarantined or remains quarantined, as applicable, and is denied as a deduction for the income year. Recalculation of outstanding profit balance
7: For the purposes of subsections (4) and (5)(b), the amount that is the outstanding profit balance must be recalculated on each application, being reduced by an amount equal to the amount of any deduction counted. Zero result
8: For the purposes of the formula in subsection (4), if the amount of the outstanding profit balance for the income year is greater than the amount of expenditure for the income year, the result of the formula is treated as zero. Example
Aircraft Ltd owns an aircraft to which the rules in this subpart apply; the income derived from the asset in the current year is less than 2% of the cost of the aircraft. The company has calculated an outstanding profit balance of $12,000 after the application of section DG 16. Aircraft is 100% owned by Parent Ltd, which has apportioned interest expenditure of $5,000 calculated under section DG 12. Parent has 2 equal shareholders, Alisa who has apportioned interest expenditure of $8,000, and Hamish who has apportioned interest expenditure of $1,000, both calculated under section DG 14. Parent must apply section DG 18 first, and is not required to quarantine any of its interest expenditure; the outstanding profit balance is reduced to $7,000 ($12,000 − $5,000). Alisa’s and Hamish’s share of the outstanding profit balance is $3,500 each ($7,000 × 50%) amount asset company deduction group of companies income year net asset balance shareholder voting interest Section DG 18 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 18 example amended 30 June 2014 section 59 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DG 19: Allocation of amounts quarantined under section DG 18
When this section applies
1: This section applies for an income year (the current year
a: a person has an amount of excess expenditure quarantined under section DG 18
b: an outstanding profit balance referred to in section DG 17(4) How this section applies
2: This section applies sequentially in the order set out in section DG 18(2) and (3) Deduction and allocation
3: The amount of previously quarantined expenditure that the person is allowed as a deduction for the current year must not be more than the lesser of—
a: the quarantined amount referred to in subsection (1)(a):
b: the amount calculated using the formula— outstanding profit balance − expenditure. Definition of items in formula
4: In the formula,—
a: outstanding profit balance
i: for company B, is the amount of the outstanding profit balance determined for the company for the current year under section DG 18(5) section DG 17(4)
ii: for a shareholder, is the amount that is the person's share of the outstanding profit balance for the current year under section DG 18(5) section DG 17(4) section DG 13(3)
b: expenditure sections DG 12 to DG 14 Recalculation of outstanding profit balance
5: For the purposes of subsections (3) and (4)(a), the amount that is the outstanding profit balance must be recalculated on each application, being reduced by an amount equal to the amount of any deduction for quarantined expenditure counted. Zero result
6: For the purposes of the formula in subsection (3), if the amount of expenditure for the current year is greater than the amount of the outstanding profit balance for the current year, the result of the formula is treated as zero. Example,
continued from section DG 18 In the following income year, Aircraft Ltd has calculated an outstanding profit balance of $16,000. Section DG 19 does not apply to Parent Ltd or Hamish because they have no previously quarantined interest expenditure. However, the section does apply to Alisa because she has $4,500 of quarantined interest expenditure from the previous year. Because Parent Ltd does not have any current year expenditure, Alisa's share of the outstanding profit balance of Parent Ltd is $8,000 ($16,000 × 50%). Alisa's current year apportioned interest expenditure is $7,000, calculated under section DG 14. Alisa is allowed a deduction for all her current year expenditure and also a deduction for $1,000 of previously quarantined expenditure ($8,000 − $7,000). Her remaining quarantined expenditure is $3,500 ($4,500 − $1,000). amount company deduction income year net asset balance shareholder Section DG 19 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DG 19 example replaced 30 June 2014 section 59 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Certain modifications to rules Heading inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 20: When income cannot be separately attributed
Exclusion from rules
1: Sections DG 16 DG 18
a: the person derives an amount of income for the income year from the use of the asset in a business activity; and
b: because of the nature of the activity, an amount cannot be separately attributed to the use of the asset. Re-inclusion
2: Subsection (1) does not apply if—
a: the person also uses the asset in deriving an amount of income that is separately attributable to the use of the asset; and
b: the use of the asset referred to in paragraph (a) is at least 80% of the total use of the asset both in the business activity referred to in subsection (1) and as described in paragraph (a). Example
Paul uses a helicopter on his farm to check stock for 50 hours in an income year, rents it out for 50 hours, and also uses it privately. While the income from the rental is clear, the income Paul derives in relation to the use of the helicopter in farming operations is not. The use of the helicopter falls outside the rules under the exclusion in section DG 20(1), and does not meet the requirements for re-inclusion under section DG 20(2) as the use of the helicopter to earn rental income is only 50% of the total income-earning use of the helicopter. Any loss attributable to the helicopter is not quarantined. amount asset business income income year Section DG 20 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 21: Opting out of treatment under this subpart
Opt-out threshold
1: If the amount of income derived for an income year from the use of an asset is less than $4,000, the person who has the asset may choose to treat the income as exempt income under section CW 8B(2) Quarantined expenditure
2: If, in relation to the use of an asset in an income year, the person has an amount of quarantined expenditure for the income year, they may choose to treat the amount of income derived that gives rise to the quarantined expenditure as exempt income under section CW 8B Consequences of opting out
3: When a person who has an asset chooses under subsection (1) or (2) to treat the income derived from the use of the asset as exempt income, any interest expenditure that must be apportioned under section DG 9 No application to companies
4: This section does not apply when the person who has the asset is a company. Example
Mike rents his bach out through the Internet to a non-associate. The gross amount he receives for an income year is $3,000. Mike can opt out of the rules in this subpart, which would mean that he would not be liable to tax on the amount, but would also not be entitled to claim any deductions in relation to the bach. amount asset exempt income income income year interest expenditure Section DG 21 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DG 22: Application of rules to part years
When this section applies
1: This section applies when the total income-earning use, private use, and non-use of an asset of a person relates to only part of an income year. Non-use period
2: For the purposes of section DG 3(1)(b) (days ÷ 365) × 62. When assets acquired during year: debt value
3: For the purposes of section DG 11(9) When assets disposed of during year: debt value
4: For the purposes of section DG 11(9) When assets both acquired and disposed of during year
5: For the purposes of section DG 11(9) When assets acquired during year: interest expenditure
6: For the purposes of sections DG 11 to DG 14 Ring-fenced losses in part years
7: For the purposes of section DG 16(1)(b) (days ÷ 365) × 2%. Definition of item in formulas
8: In the formulas in subsections (2) and (7), days section DG 9(4) amount asset company debt value income year interest expenditure private use Section DG 22 inserted 17 July 2013 section 30(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DH: Interest incurred in relation to certain land
Subpart DH repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Contents
DH 1: Interest related to certain land
Section DH 1 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DH 2: When this subpart applies
Section DH 2 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DH 3: When this subpart applies: companies
Section DH 3 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DH 4: When this subpart does not apply: exemptions for new builds, development, social or emergency or transitional housing, and council housing
Section DH 4 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DH 5: Key terms
Section DH 5 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DH 6: Interposed residential property percentage
Section DH 6 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DH 7: Grandparented residential interest
Section DH 7 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DH 8: Deduction not allowed
Section DH 8 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DH 9: Exception to limited denial of deductions: loans denominated in foreign currencies
Section DH 9 repealed 31 March 2023 section 45 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
DH 10: Limited denial of deductibility: simplified calculation of interest affected
Section DH 10 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DH 11: Denied amounts: treatment upon disposal of disallowed residential property
Section DH 11 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DH 12: Valuation
Section DH 12 repealed 1 April 2025 section 48 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DN: Attributed losses from foreign equity
Contents
Attributed controlled foreign company (CFC) loss
DN 1: Attributed controlled foreign company loss
Deduction
1: A person is allowed a deduction for an attributed controlled foreign company (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 2004 No 35 s DN 1
DN 2: When attributed CFC loss arises
General rule
1: 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
bb: the person is not a portfolio investment entity; 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 net attributable CFC loss for the accounting period under section EX 20C
g:
h: the CFC is not a non-attributing active CFC for the accounting period, under section EX 21B
i: the CFC is not a non-attributing Australian CFC for the accounting period, under section EX 22 Special rule: Attributable CFC amount from personal services
2: If a person and a non-attributing active CFC or non-attributing Australian CFC meet the requirements of subsection (1)(a) to (e) and the CFC derives income from personal services that is an attributable CFC amount under section EX 20B(3)(h) attributed CFC loss
a: the person's income interest in the CFC:
b: the amount by which the CFC's expenditure incurred in deriving the income from personal services exceeds the income from personal services. accounting period attributable CFC amount attributed CFC loss CFC foreign company grey list income interest income year net attributable CFC loss New Zealand resident non-attributing active CFC non-attributing Australian CFC portfolio investment entity transitional resident 2004 No 35 s DN 2 Section DN 2(1) heading inserted 6 October 2009 section 90(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2(1)(bb) inserted 7 May 2012 section 12(1) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 2(1)(f) substituted 6 October 2009 section 90(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2(1)(g) repealed 6 October 2009 section 90(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2(1)(h) added 6 October 2009 section 90(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2(1)(i) added 6 October 2009 section 90(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2(2) heading added 6 October 2009 section 90(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2(2) added 6 October 2009 section 90(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2 list of defined terms attributable CFC amount inserted 6 October 2009 section 90(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2 list of defined terms branch equivalent loss repealed 6 October 2009 section 90(4)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2 list of defined terms net attributable CFC loss inserted 6 October 2009 section 90(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2 list of defined terms non-attributing active CFC inserted 6 October 2009 section 90(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2 list of defined terms non-attributing Australian CFC inserted 6 October 2009 section 90(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 2 list of defined terms portfolio investment entity inserted 7 May 2012 section 12(2) Taxation (International Investment and Remedial Matters) Act 2012
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 2004 No 35 s DN 3
DN 4: Ring-fencing cap on deduction
Amount of deduction: CFC not elective attributing CFC
1: The deduction that a person is allowed in an income year for an attributed CFC loss from a CFC (the first CFC
a: total attributed CFC income of the person for the income year from other CFCs, each of which is resident in the same country as the first CFC for the relevant accounting period:
b: total FIF income of the person for the income year from FIFs,—
i: each of which is resident in the same country as the first CFC for the relevant accounting period; and
ii: for each of which the person uses the attributable FIF income method Amount of deduction: elective attributing CFC
1B: The deduction that a person is allowed in an income year for an attributed CFC loss from a CFC (the first CFC
a: total attributed CFC income of the person for the income year from other CFCs, each of which—
i: is resident in the same country as the first CFC for the relevant accounting period; and
ii: is an elective attributing CFC for the person in the income year; and
iii: has the same election commencement year as the first CFC:
b: total FIF income of the person for the income year from FIFs, each of which—
i: is resident in the same country as the first CFC for the relevant accounting period; and
ii: is an elective attributing FIF for the person in the income year; and
iii: has the same election commencement year as the first CFC. Income only once
2: When subsection (1) or (1B)
a: subsection (1) or (1B)
b: section DN 8 Relationship with subpart IQ
3: Any excess not able to be deducted because of subsection (1) or (1B) is an attributed CFC net loss able to be used under sections IQ 2 IQ 4 IQ 9 accounting period amount attributed CFC income attributed CFC loss attributed CFC net loss attributable FIF income method CFC deduction election commencement year elective attributing CFC elective attributing FIF FIF FIF income FIF loss income year 2004 No 35 s DN 4 Section DN 4(1) heading replaced 2 November 2012 section 24(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 4(1) replaced 2 November 2012 section 24(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 4(1)(b)(ii) amended 2 November 2012 section 24(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 4(1B) heading inserted 2 November 2012 section 24(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 4(1B) inserted 2 November 2012 section 24(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 4(2) amended 2 November 2012 section 24(3) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 4(3) replaced 2 November 2012 section 24(4) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 4 list of defined terms attributable FIF income method inserted 7 May 2012 section 13(2)(b) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 4 list of defined terms branch equivalent method repealed 7 May 2012 section 13(2)(a) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 4 list of defined terms election commencement year inserted 2 November 2012 section 24(5) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 4 list of defined terms elective attributing CFC inserted 2 November 2012 section 24(5) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 4 list of defined terms elective attributing FIF inserted 2 November 2012 section 24(5) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Foreign investment fund (FIF) loss
DN 5: Foreign investment fund loss
Deduction
1: A person is allowed a deduction for a FIF loss. Ring-fencing rule for loss calculated under attributable FIF income method
2: The deduction for a FIF loss calculated under the attributable FIF income method section DN 8 Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. attributable FIF income method calculation method capital limitation deduction FIF loss general limitation general permission supplement 2004 No 35 s DN 5 Section DN 5(2) heading amended 7 May 2012 section 14(1) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 5(2) amended 7 May 2012 section 14(1) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 5 list of defined terms attributable FIF income method inserted 7 May 2012 section 14(2)(b) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 5 list of defined terms branch equivalent method repealed 7 May 2012 section 14(2)(a) Taxation (International Investment and Remedial Matters) Act 2012
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 25, 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 section EX 29
c: at that time, the rights are not exempt from being an attributing interest in a FIF under any of—
i: the exemption for ASX-listed Australian companies in section EX 31
ii: the exemption for Australian unit trusts with 25% turnover in section EX 32
iii: the exemption for Australian regulated superannuation savings in section EX 33
iv: the CFC rules section EX 34
v: the exemption in section EX 35
vi: the 10-year exemption for a venture capital company emigrating to a grey list country in section EX 36
vii: the 10-year exemption for a grey list company owning a New Zealand venture capital company in section EX 37
viib: the exemption for shares in a grey list company acquired under a venture investment agreement in section EX 37B
viii: the exemption for an employee share section EX 38 (Exemptions for employee share schemes)
ix:
x:
xi: the foreign exchange control exemption in section EX 40
xii: the exemption for a non-resident or transitional resident, in section EX 41
xiii:
xiva: the exemption for an interest in a foreign superannuation scheme that is not a FIF superannuation interest in section EX 42B
xiv: the annuity or pension exemption in section EX 43 exception):
xv: an exemption given by sections EX 50 EX 18A(2)(b)(i) EX 21B
d: if the person is a natural person
i: the total cost, calculated under section EX 68
ii: the person includes, in a return for the year, FIF income or loss from an attributing interest in a FIF:
iii: the person has, in the return for 1 of the preceding 4 income years (the earlier year section EX 68
e: if the person is acting as trustee of a trust that meets the requirements of subsection (4),—
i: the total cost, calculated under section EX 68
ii: the person includes, in a return for the year, FIF income or loss from an attributing interest in a FIF:
iii: the person has, in a return for 1 of the preceding 4 income years (the earlier year section EX 68
f: 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
g: 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 44 to EX 56 EX 60 EX 61 Treatment of transaction under section EX 63, EX 65, or EX 67
1B: If a person is treated under section EX 63(5) EX 65 EX 67 Look-through calculation methods
2: Despite subsection (1), if the calculation method is the attributable FIF income 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 (f) are applied on the basis that references in subsection (1)(a), (b), (c), and (f) to any time in the income year are read as references to any time in the relevant accounting period. FIF loss from CFC with FIF interest
3: FIF loss section EX 58 regardless of whether the CFC is a non-attributing active CFC under section EX 21B section EX 22 Requirements for trustees
4: Subsection (1)(e) applies to the trustee of a trust for an income year if—
a: 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:
b: 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; and
ii: is required by a court order to pay damages or compensation to the beneficiary:
c: 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:
d: the settlor of the trust is the Accident Compensation Corporation. accounting period amount attributable FIF income method attributing interest calculation method CFC employee share scheme FIF FIF income FIF loss FIF superannuation interest foreign company foreign superannuation scheme grey list grey list company income interest income year life insurance policy loss New Zealand resident non-attributing Australian CFC non-resident relative settlor share shareholder transitional resident trustee unit trust venture investment agreement 2004 No 35 s DN 6 Section DN 6(1)(c)(iii) replaced 24 February 2016 section 108(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DN 6(1)(c)(iv) amended 24 February 2016 section 108(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DN 6(1)(c)(v) replaced 7 May 2012 section 15(1) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6(1)(c)(viib) inserted 29 March 2025 section 43(1) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DN 6(1)(c)(viii) amended 31 March 2023 section 48(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DN 6(1)(c)(viii) amended 29 September 2018 section 50 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DN 6(1)(c)(ix) repealed 30 March 2025 section 43(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DN 6(1)(c)(x) repealed 30 March 2025 section 43(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DN 6(1)(c)(xiii) repealed 1 April 2014 section 36 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DN 6(1)(c)(xiva) inserted 29 March 2025 section 43(3) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DN 6(1)(c)(xiv) amended 7 May 2012 section 15(2) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6(1)(c)(xv) inserted 7 May 2012 section 15(2) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6(1)(d) replaced 7 May 2012 section 15(3) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6(1)(d) amended 29 March 2018 section 258 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DN 6(1)(e) replaced 7 May 2012 section 15(3) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6(1B) heading inserted 1 April 2008 section 344(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DN 6(1B) inserted 1 April 2008 section 344(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DN 6(2) amended 7 May 2012 section 15(4) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6(3) heading substituted 6 October 2009 section 91(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 6(3) substituted 6 October 2009 section 91(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 6(3) amended 24 February 2016 section 108(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DN 6 list of defined terms accounting profits method repealed 7 May 2012 section 15(5)(a) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6 list of defined terms attributable FIF income method inserted 7 May 2012 section 15(5)(b) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6 list of defined terms branch equivalent method repealed 7 May 2012 section 15(5)(a) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6 list of defined terms employee share scheme inserted 31 March 2023 section 48(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DN 6 list of defined terms FIF income inserted 7 May 2012 section 15(5)(b) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6 list of defined terms FIF superannuation interest inserted 29 March 2025 section 43(5) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DN 6 list of defined terms loss inserted 7 May 2012 section 15(5)(b) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 6 list of defined terms non-attributing Australian CFC inserted 6 October 2009 section 91(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DN 6 list of defined terms settlor inserted 24 February 2016 section 243 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DN 6 list of defined terms venture investment agreement inserted 29 March 2025 section 43(4) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
DN 7: Calculation of FIF loss
The amount of a FIF loss is calculated, using the relevant calculation method, under sections EX 44 to EX 61 amount calculation method FIF loss 2004 No 35 s DN 7
DN 8: Ring-fencing cap on deduction:
attributable FIF income method Amount of deduction: FIF not elective attributing FIF
1: The deduction that a person is allowed in an income year for a FIF loss from a FIF (the first FIF
a: total attributed CFC income of the person for the income year from CFCs, each of which is resident in the same country as the first FIF for the relevant accounting period:
b: total FIF income of the person for the income year from other FIFs,—
i: each of which is resident in the same country as the first FIF for the relevant accounting period; and
ii: for each of which the person uses the attributable FIF income method Amount of deduction: elective attributing FIF
1B: The deduction that a person is allowed in an income year for a FIF loss from a FIF (the first FIF
a: total attributed CFC income of the person for the income year from CFCs, each of which—
i: is resident in the same country as the first FIF for the relevant accounting period; and
ii: is an elective attributing CFC for the person in the income year; and
iii: has the same election commencement year as the first FIF:
b: total FIF income of the person for the income year from other FIFs, each of which—
i: is resident in the same country as the first FIF for the relevant accounting period; and
ii: is an elective attributing FIF for the person in the income year; and
iii: has the same election commencement year as the first FIF. Income only once
2: When subsection (1) or (1B)
a: subsection (1) or (1B)
b: section DN 4 Relationship with section IQ 3
3: Any excess not able to be deducted because of subsection (1) or (1B) is a FIF net loss able to be used under section IQ 3 accounting period amount attributed CFC income attributable FIF income method attributed CFC loss CFC deduction election commencement year elective attributing CFC elective attributing FIF FIF FIF income FIF loss FIF net loss income year 2004 No 35 s DN 9 Section DN 8(1) heading replaced 2 November 2012 section 25(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 8(1) replaced 2 November 2012 section 25(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 8(1)(b)(ii) amended 2 November 2012 section 25(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 8(1B) heading inserted 2 November 2012 section 25(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 8(1B) inserted 2 November 2012 section 25(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 8(2) amended 2 November 2012 section 25(3) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 8(3) replaced 2 November 2012 section 25(4) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 8 list of defined terms attributable FIF income method inserted 7 May 2012 section 16(3)(b) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 8 list of defined terms branch equivalent method repealed 7 May 2012 section 16(3)(a) Taxation (International Investment and Remedial Matters) Act 2012 Section DN 8 list of defined terms election commencement year inserted 2 November 2012 section 25(5) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 8 list of defined terms elective attributing CFC inserted 2 November 2012 section 25(5) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DN 8 list of defined terms elective attributing FIF inserted 2 November 2012 section 25(5) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
DN 9: Treatment of certain costs incurred in acquiring FIF interests
No deduction
1: A person is denied a deduction for an amount of expenditure that they incur in acquiring a FIF interest from which income under section CX 57B Link with subpart DA
2: This section overrides the general permission. amount deduction general permission income Section DN 9 inserted 29 March 2018 section 51 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DO: Farming and aquacultural business expenditure
Contents
Farming
DO 1: Enhancements to land
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 kinds 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 significant capital activity 2004 No 35 s DO 1 Section DO 1 heading amended 17 July 2013 section 31 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DO 2: Plantings for erosion, shelter, and water protection purposes
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 or plants, whether or not on the land, for the purpose of—
a: preventing or combating erosion of the land:
b: providing shelter to the land:
c: preventing or mitigating detrimental effects on a watercourse or body of water from the discharge of farming or agricultural contaminants. 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 2004 No 35 s DO 2 Section DO 2 heading replaced 17 July 2013 section 32(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DO 2(2) replaced 17 July 2013 section 32(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
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 2004 No 35 s DO 3
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 20
c: the expenditure on the improvement is not expenditure to which sections DO 5 to DO 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 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 being 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 20 percentage × diminished value. Definition of items in formula
5: In the formula,—
a: schedule 20 percentage schedule 20
b: diminished value Amount, and timing, for non-listed horticultural plants
6: When non-listed horticultural plants described in schedule 20
a: subsection (4) does not apply; and
b: the amount of the deduction is the diminished value of the non-listed horticultural plants at the time they ceased to exist or to be used in deriving income; and
c: the deduction is allocated to the income year in which the non-listed horticultural plants ceased to exist or to be used in deriving income. 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. Amendment of schedule 20 by Order in Council
8: The Governor-General may by Order in Council make regulations amending schedule 20 Secondary legislation
9: An Order in Council under subsection (8) is secondary legislation ( see Part 3 amount business capital limitation deduction diminished value general limitation general permission income income year New Zealand non-listed horticultural plant own 2004 No 35 s DO 4 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section DO 4(9) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section DO 4(9) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
DO 5: Expenditure on land: planting of listed horticultural plants
When this section applies
1: This section applies when—
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 denied 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— rate × 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 6
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 6
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 6
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 is allowed a deduction under section DO 6
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 choose 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 2004 No 35 s DO 4B Section DO 5(4) formula replaced 30 June 2014 section 60(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DO 6: Expenditure on land: horticultural replacement planting
When this section applies
1: This section applies to a person who carries on a horticultural business on land in New Zealand and who, in an income year (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 set out in 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 chooses 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 is denied a 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— replacement expenditure × 7.5% ÷ fraction. Definition of items in formula
4: In the formula in subsection (3),—
a: replacement expenditure
b: fraction Amount of deduction if deduction in both of 2 preceding income years
5: If the person has been allowed 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— replacement expenditure × 7.5% ÷ fraction. Definition of items in formula
7: In the formula in subsection (6),—
a: replacement expenditure
b: fraction Formula for second amount
8: The second amount is calculated using the formula— replacement expenditure × (15% − earlier fraction − later fraction) Definition of items in formula
9: In the formula in subsection (8),—
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 2004 No 35 s DO 4C
DO 7: Accounting for expenditure on listed horticultural plants under sections DO 5 and DO 6
Separate accounting for additional listed horticultural plants if deduction under section DO 6
1: A person to whom section DO 5 sections DO 5 DO 6
a: the person has had a deduction under section DO 6
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 6
2: Despite subsection (1), a person may account under sections DO 5 DO 6 section DO 6 deduction income year listed horticultural plant planting replacement plant 2004 No 35 s DO 4D
DO 8: Meaning of planting and plot
In this section and sections DO 5 to DO 7 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 5 DO 6 plot income year listed horticultural plant planting 2004 No 35 s DO 4E
DO 9: Meaning of replaced area fraction
Meaning
1: In section DO 6 replaced area fraction (replacement area ÷ plot area) × 100%. Definition of items in formula
2: In the formula in subsection (1),—
a: replacement area
b: plot area income year listed horticultural plant planting plot replacement plant 2004 No 35 s DO 4E
DO 9B: Meaning of diminished value
Meaning
1: In section DB 46 sections DO 4 DO 5 DO 11 DO 12 DO 13 DP 3 DP 4 DZ 17 DZ 18 schedule 20 diminished value amount of expenditure + income derived − deductions allowed. Definition of items in formula
2: In the formula in subsection (1),—
a: amount of expenditure
i: on an improvement described in section DO 4 DO 5 DO 12 DP 3
ii: of a type described in section DB 46
b: income derived section CB 28(8)
c: deductions allowed
i: in any earlier income years under this Act or an earlier Act:
ii: in the income year under this Act, except an amount allowed in the income year under section DB 46 DO 4 DO 5 DO 6 DO 12 DP 3 amount deduction diminished value income income year Section DO 9B inserted 28 March 2024 section 49(1) section 49(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DO 10: Farming or horticulture expenditure of lessor or sublessor
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 5 DO 6
ii: is allowed a deduction under section DO 4(2) DO 5(2) DO 6 Relationship with sections DO 1, DO 2, DO 4, DO 5, and DO 6
2: Sections DO 1 DO 2 DO 4 DO 5 DO 6 business deduction estate lease leasehold estate New Zealand own term of the lease 2004 No 35 s DO 5
DO 11: Improvement destroyed or made useless
When this section applies
1: This section applies when, 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 20
b: the improvement is destroyed or made useless for the purpose of deriving the person's income
c: the person would be entitled for the income year to a deduction under section DO 4 DO 5
d: the uselessness
e: the uselessness 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 plus a deduction for the amount of expenditure for removing the improvement from the land referred to in subsection (1)(a) 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 tax year 2004 No 35 s DO 5B Section DO 11(1)(b) amended 17 July 2013 section 34(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DO 11(1)(c) amended 17 July 2013 section 34(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DO 11(1)(d) amended 17 July 2013 section 34(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DO 11(1)(e) amended 17 July 2013 section 34(4) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DO 11(2) amended 17 July 2013 section 34(5) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DO 11B: Entering partners’ livestock deduction
Section DO 11B repealed 6 October 2009 section 92(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Aquaculture
DO 12: 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 schedule 20, parts B to F 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 being 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 20 percentage × diminished value. Definition of items in formula
5: In the formula,—
a: schedule 20 percentage schedule 20, parts B to F
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 2004 No 35 s DO 6
DO 13: Improvement destroyed or made useless
When this section applies
1: This section applies when, in an income year of a person,—
a: the person carries on an aquacultural business in New Zealand—
i: that meets the requirements of section DO 12(1)(b)
ii: for the purposes of which an improvement described in schedule 20
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 12
d: the damage occurs in an income year that corresponds to the 2005–06 tax year or a later 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 tax year 2004 No 35 s DO 7
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 2004 No 35 s DP 1 Section DP 1(1)(e) amended 29 March 2025 section 44(1) section 44(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 126 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 2004 No 35 s DP 2 Section DP 2 list of defined terms forestry business inserted 7 December 2009 section 126 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 20 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 being 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 20 percentage × diminished value. Definition of items in formula
5: In the formula,—
a: schedule 20 percentage schedule 20
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 2004 No 35 s DP 3 Section DP 3 list of defined terms forestry business inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DP 4: Improvement destroyed or made useless
When this section applies
1: This section applies when, 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 tax year or a later 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 tax year 2004 No 35 s DP 3B Section DP 4 list of defined terms forestry business inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DP 5: 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 pay 2004 No 35 s DP 4
DP 6: 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 pay 2004 No 35 s DP 5
DP 7: Land contouring: no deduction
No deduction
1: A person who derives income under section CB 24 CB 25 Link with subpart DA
2: This section overrides the general permission. deduction general permission income 2004 No 35 s DP 6
DP 8: Forestry business on land
acquired 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 section FA 2B
3: Section FA 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 pay qualifying debenture 2004 No 35 s DP 7 Section DP 8 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DP 8(3) heading replaced 1 April 2015 Act section 61(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DP 8(3) replaced 1 April 2015 Act section 61(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DP 8 list of defined terms forestry business inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DP 8 list of defined terms substituting debenture repealed 1 April 2015 Act section 61(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DP 9: Cost of acquiring timber: forestry business on land
acquired When this section applies
1: This section applies when a forestry company acquires Sellers of Maori land
2: For the purposes of subsection (1),—
a: land disposed of disposed of
b: land disposed of disposed of 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 to the seller at the date of the disposal
b: the amount described in section CB 25(3) business forestry business forestry company holding company Maori incorporation Maori owners standing timber trustee 2004 No 35 s DP 8 Section DP 9 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DP 9(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DP 9(2)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DP 9(2)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DP 9(3)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DP 9 list of defined terms forestry business inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DP 9B: 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 9B inserted 29 August 2011 section 17 Taxation (Tax Administration and Remedial Matters) Act 2011
DP 10: 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 25 Recharacterisation or avoidance
2: For a person acquiring timber or a right to take timber in a disposal or distribution to which section FB 6 FB 7 GC 1 GC 2
a:
b: the consideration under sections FB 6 FB 7
c: the price realised under section GC 1 Certain disposals
d: the price realised under section GC 2 Transfers between associated persons
3: Subsections (4) and (5) apply if—
a: a person (the transferor transferee
b: as a result, the transferor has an amount of income under section CB 24 CB 25 Limit on deduction for transferor
4: The deduction that the transferor is allowed for the cost of the timber, right to take timber, or standing timber must not be more than the amount of the income. Transferee’s deduction
5: The deduction that the transferee is allowed for the cost of acquiring the timber is calculated on the basis that the transferee acquired the timber for the total of
a: the cost to the transferee of acquiring the timber; and
b: the amount, if any, for which the transferor is denied a deduction under subsection (4). amount associated person dispose income right to take timber standing timber timber 2004 No 35 ss DP 9 GD 15 Section DP 10(2) amended 1 April 2024 section 50(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DP 10(2)(a) repealed 1 April 2024 section 50(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DP 10(2)(c) amended 1 April 2024 section 50(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DP 10(5) amended 7 December 2009 section 14(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DP 10 list of defined terms pay repealed 1 April 2024 section 50(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DP 11: 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 24 CB 25
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 Exception
4B: Subsection (2) does not apply if the amount of income of the person under section CB 24 section CW 1B 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 cost of timber deduction dispose exempt income general permission income income year timber trading stock Section DP 11 substituted 7 December 2009 section 15(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DP 11(4B) heading inserted 27 February 2014 section 37 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DP 11(4B) inserted 29 August 2011 section 18(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DP 11 list of defined terms exempt income inserted 29 August 2011 section 18(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DP 11 list of defined terms income inserted 29 August 2011 section 18(2) Taxation (Tax Administration and Remedial Matters) Act 2011
DQ: Income equalisation schemes and environmental restoration accounts schemes
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 income year corresponding 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 income year main income equalisation scheme person supplement tax year 2004 No 35 s DQ 1
DQ 2: Adverse event income equalisation scheme
Section DQ 2 repealed 18 March 2019 section 154(1) section 154(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
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 67(2) Timing of deduction
2: The deduction is allocated to the income year corresponding to the tax year described in section EH 67(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 income year person supplement tax year thinning operations income equalisation scheme 2004 No 35 s DQ 3
DQ 4: Environmental restoration accounts scheme
Deduction for payment
1: A person is allowed a deduction of the amount set out in section EK 7 section EK 2 section EK 9 Timing of deduction
2: The deduction under subsection (1) is allocated to the income year referred to in section EK 7 Deduction for transfer
3: A person is allowed a deduction for an income year of the amount set out in section EK 8
a: a transfer under section EK 15 application
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 referred to in 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. apply capital limitation deduction general limitation general permission income year pay supplement 2004 No 35 s DQ 4 Section DQ 4(3)(a) amended 2 June 2016 section 12(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section DQ 4 list of defined terms apply inserted 2 June 2016 section 12(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
DR: Life insurance business expenditure
Contents
DR 1: Policyholder base allowable deduction of life insurer
Deduction
1: If, but for this section, a life insurer has an amount of policyholder base allowable deduction for an income year and that amount is neither a deduction under this Part nor denied as a deduction under this Part, the amount is a deduction of the life insurer for the income year. No cross-deducting: section EY 2
2: A policyholder base allowable deduction is not allowed against shareholder base income. Section EY 2 Link with subpart DA
3: Subsections (1) and (2) override the general permission. amount deduction general permission income year life fund PIE life insurer multi-rate PIE policyholder base allowable deduction policyholder base income shareholder base income Section DR 1 substituted 1 July 2010 section 94(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DR 2: Shareholder base allowable deduction of life insurer
Deduction
1: If, but for this section, a life insurer has an amount of shareholder base allowable deduction for an income year and that amount is neither a deduction under this Part nor denied as a deduction under this Part, the amount is a deduction of the life insurer for the income year. No cross-deducting
2: A shareholder base allowable deduction is not allowed against policyholder base income. Link with subpart DA
3: Subsections (1) and (2) override the general permission. amount deduction general permission income year life insurer policyholder base income shareholder base allowable deduction Section DR 2 substituted 1 July 2010 section 94(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DR 3: Life reinsurance premiums to reinsurer outside New Zealand
No deduction for premiums under certain policies
1: A life insurer is denied a deduction for life reinsurance premiums they incur if the relevant life reinsurance policy,—
a: was not offered in New Zealand ; and
b: was not entered into in New Zealand. No deduction for premiums to certain life reinsurers
2: A life insurer is denied a deduction for a life reinsurance premium incurred under a life reinsurance policy with a life reinsurer who is resident in a country or territory outside New Zealand if the life reinsurance premium is excluded from taxation by New Zealand under a double tax agreement between New Zealand and the country or territory. deduction double tax agreement life insurer life reinsurance life reinsurance policy life reinsurer New Zealand Section DR 3 substituted 1 July 2010 section 94(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DR 3 heading replaced 1 July 2018 section 11(1) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section DR 3(1) heading replaced 1 July 2018 section 11(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section DR 3(1)(a) amended 27 February 2014 section 38 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DR 3(2) heading inserted 1 July 2018 section 11(3) section 11(5) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section DR 3(2) inserted 1 July 2018 section 11(3) section 11(5) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section DR 3 list of defined terms amount repealed 1 July 2018 section 11(4)(a) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section DR 3 list of defined terms double tax agreement inserted 1 July 2018 section 11(4)(b) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section DR 3 list of defined terms general permission repealed 1 July 2018 section 11(4)(a) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section DR 3 list of defined terms income year repealed 1 July 2018 section 11(4)(a) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section DR 3 list of defined terms life reinsurer inserted 1 July 2018 section 11(4)(b) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018
DR 4: Life insurers' claims
No deduction on account of claims
1: For a life insurer's life insurance policies, the life insurer is denied a deduction relating to the life insurer's outstanding claims or for a claim's expenditure or loss for an income year, except as provided by—
a: section EY 24
b: subsection (2). Deduction for payments of current claims Link with subpart DA
2: The life insurer is allowed a deduction as provided by section EY 20
3: This section supplements the general permission. The general limitations still apply, except that the capital limitation does not apply for a life insurer and the life risk components of claims under life insurance policies that are not annuities and not profit participation policies and have been transferred to the life insurer capital limitation claim deduction general limitation general permission life insurance policy life insurer life risk component profit participation policy Section DR 4 added 1 July 2010 section 94(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DR 4 heading replaced 27 February 2014 section 39(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DR 4(2) replaced 27 February 2014 section 39(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DR 4(3) amended 27 February 2014 section 39(3) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DR 4 list of defined terms capital limitation inserted 27 February 2014 section 39(4) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DR 4 list of defined terms life risk component inserted 27 February 2014 section 39(4) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DR 4 list of defined terms profit participation policy inserted 27 February 2014 section 39(4) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
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 a provision of this Act other than section DS 2B Avoidance arrangements
5: The amount of the deduction may be reduced under—
a: section GB 17
b: section GB 18 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. arrangement capital limitation completed deduction film film production expenditure film right general limitation general permission New Zealand 2004 No 35 s DS 1 Section DS 1(2) substituted 7 December 2009 section 16(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DS 1(4) amended 1 April 2008 section 345(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 the film—
a: 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: is intended to be shown as an advertisement:
c: section DS 2B Timing of deduction
4: The deduction is allocated under—
a: section EJ 4 EJ 5 large budget film grant
b: section EJ 7 EJ 8 large budget film grant No other deduction
5: No other deduction for film production expenditure is allowed under a provision of this Act other than section DS 2B Avoidance arrangements
6: The amount of the deduction may be reduced or the timing of the deduction may be delayed under—
a: section GB 17
b: section GB 18
c: section GB 19 Link with subpart DA
7: 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. arrangement capital limitation completed deduction film film production expenditure film right general limitation general permission large budget film grant New Zealand pay supplement 2004 No 35 s DS 2 Section DS 2(3) heading substituted 1 April 2008 section 346(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DS 2(3) substituted 1 April 2008 section 346(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DS 2(4) heading substituted 1 January 2010 section 95(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DS 2(4) substituted 1 January 2010 section 95(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DS 2(4)(a) amended 7 September 2010 section 23(1)(a) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DS 2(4)(b) amended 7 September 2010 section 23(1)(b) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DS 2(5) amended 1 April 2008 section 346(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DS 2 list of defined terms government screen production payment repealed 7 September 2010 section 23(2)(a) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DS 2 list of defined terms government screen production payment inserted 1 January 2010 section 95(2)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DS 2 list of defined terms large budget film grant inserted 7 September 2010 section 23(2)(b) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DS 2 list of defined terms large budget screen production grant repealed 1 January 2010 section 95(2)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DS 2B: Expenditure when film or film right intended for disposal
When this section applies
1: This section applies when—
a: a person incurs film production expenditure or expenditure in acquiring a film right; and
b: at the time of incurring the expenditure, the person intends to dispose of the film or film right. Deduction
2: The person is allowed a deduction for the amount of the expenditure 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. amount capital limitation deduction film film production expenditure film right general limitation general permission 2004 No 35 s DS 2B Section DB 2B inserted 1 April 2008 section 347 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
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 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 film income film reimbursement scheme time bar 2004 No 35 s DS 3
DS 4: Meaning of film reimbursement scheme
Meaning
1: Film reimbursement scheme 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: amount arrangement associated person deduction film income film reimbursement scheme film right income shareholder 2004 No 35 s DS 4 Section DS 4(5) heading repealed 17 July 2013 section 172 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DS 4(5) repealed 17 July 2013 section 172 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DS 4 list of defined terms 1973 version provisions repealed 1 April 2010 section 96(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DS 4 list of defined terms 1988 version provisions repealed 1 April 2010 section 96(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DS 4 list of defined terms 1990 version provisions repealed 1 April 2010 section 96(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DS 4 list of defined terms loss-attributing qualifying company repealed 17 July 2013 section 172 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
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 for 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: carried forward and re-instated next year
3: Any excess not allocated to the current year because of 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, if sections IA 5 IB 3 IP 3 IP 3B deduction income year loss balance New Zealand petroleum development expenditure petroleum exploration expenditure petroleum mining operation residual expenditure tax loss component Section DT 1A inserted 6 October 2009 section 97(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 1A(4) amended 30 March 2022 section 76 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section DT 1A(4) amended 30 March 2021 section 33 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
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 2004 No 35 s DT 1
DT 2: Arrangement for petroleum exploration expenditure and
disposal 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) but only to the extent of an amount equal to the greater of zero and the amount calculated using the formula— expenditure − (consideration − lesser amount). Exclusion
3: If consideration for the property is derived in an income year, the person’s deductions in earlier 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 earlier 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) 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 2004 No 35 s DT 2 Section DT 2 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DT 2(1)(b) amended 1 April 2010 section 98(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 2(1)(b) amended 6 October 2009 section 98(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 2(1)(c)(ii) substituted 6 October 2009 section 98(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 2(1)(c)(iii) substituted 6 October 2009 section 98(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 2 list of defined terms 1973 version provisions repealed 1 April 2010 section 98(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 2 list of defined terms 1988 version provisions repealed 1 April 2010 section 98(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 2 list of defined terms 1990 version provisions repealed 1 April 2010 section 98(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DT 3: Acquisition of privileges and permits
When expenditure for privileges or permits incurred
1: The consideration that a person pays to acquire a privilege or permit referred to in subsection (2) from a petroleum miner is incurred in the income year in which the petroleum miner disposes of the privilege or permit to the person. Privileges and permits
2: Subsection (1) applies to the person and a privilege or permit if—
a: the consideration that the person pays to acquire the privilege or permit is petroleum exploration expenditure; and
b: the privilege or permit is—
i: an existing privilege that is a prospecting licence granted under Part 1 of the Petroleum Act 1937:
ii: a prospecting permit for petroleum:
iii: an exploration permit for petroleum. dispose existing privilege exploration permit income year pay petroleum petroleum miner prospecting permit Section DT 3 replaced petroleum exploration expenditure 24 February 2016 section 109(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 pay petroleum exploration expenditure petroleum miner 2004 No 35 s DT 4 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 12
b: section EJ 12B method); or
c: section EJ 13 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 2004 No 35 s DT 5 Section DT 5(1) heading substituted 6 October 2009 section 99(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 5(1) substituted 6 October 2009 section 99(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 5(2) heading substituted 6 October 2009 section 99(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 5(2) substituted 6 October 2009 section 99(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 5(2)(b) amended 1 April 2018 section 52(1) section 52(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 5(2)(c) inserted 1 April 2018 section 52(2) section 52(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DT 6: Expenditure on petroleum mining assets
Expenditure that a person incurs in acquiring acquired
a: petroleum is produced in commercial quantities on a continuing basis under a petroleum permit that is the one being acquired
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) or (c)
c: an application for a petroleum mining permit for the permit area has been made by a person entitled under section 32(3) permit area petroleum petroleum development expenditure petroleum mining asset petroleum permit 2004 No 35 s DT 6 Section DT 6 amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DT 6(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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—
a: incurred by the petroleum miner in the income year in which commercial production from the well starts; and
b: allocated as provided by section DT 5(2) amount commercial production exploratory well expenditure income income year petroleum petroleum development expenditure petroleum miner 2004 No 35 s DT 7 Section DT 7(2) replaced 1 April 2018 section 53(1) section 53(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DT 7B: Resuming commercial production: petroleum development expenditure
When this section applies
1: This section applies when a petroleum miner has had an amount of petroleum development expenditure treated as income under section CT 5B Amount of income treated as petroleum development expenditure
2: An amount equal to the amount that is treated as income under section CT 5B
a: incurred by the petroleum miner in the income year referred to in section CT 5B
b: allocated as provided by section DT 5(2) amount deduction income income year petroleum development expenditure petroleum miner Section DT 7B inserted 1 April 2018 section 54(1) section 54(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DT 8: Acquisition of certain petroleum mining assets
When expenditure for petroleum mining assets incurred
1: The consideration that a person pays to acquire a petroleum mining asset, excluding a privilege or permit referred to in subsection (2), from a petroleum miner is incurred in the income year in which the petroleum miner disposes of the petroleum mining asset to the person. Privileges and permits
2: For the purposes of subsection (1) for a person, a privilege or permit is excluded if—
a: the consideration that the person pays to acquire the privilege or permit is petroleum exploration expenditure; and
b: the privilege or permit is—
i: an existing privilege that is a prospecting licence granted under Part 1 of the Petroleum Act 1937:
ii: a prospecting permit for petroleum:
iii: an exploration permit for petroleum. dispose existing privilege exploration permit income year pay petroleum petroleum development expenditure petroleum miner petroleum mining asset prospecting permit Section DT 8 replaced petroleum exploration expenditure 24 February 2016 section 110(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 16(2) section EJ 15 No deduction
2: The miner is denied a deduction for the amount that section EJ 16(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 2004 No 35 s DT 9 Section DT 9(1)(b) amended 29 August 2011 section 19(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DT 9(2) substituted 29 August 2011 section 19(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 2004 No 35 s DT 10
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 2004 No 35 s DT 11 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) or (c) 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 2004 No 35 s DT 12
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 2004 No 35 s DT 13
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-in party farm-out arrangement general limitation general permission petroleum development expenditure prospecting expenditure supplement 2004 No 35 s DT 14
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 an existing privilege; and
b: the associated person—
i: undertakes petroleum mining operations or decommissioning
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 or decommissioning Deduction
2: The associated person is allowed a deduction for expenditure or loss that they incur in the petroleum mining operations or decommissioning 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 or decommissioning Link with subpart DA
4: This section overrides the general permission. amount arrangement associated person decommissioning deduction existing privilege general permission income petroleum miner petroleum mining operations 2004 No 35 s DT 15 Section DT 15(1)(b)(i) amended 1 April 2018 section 55(1) section 55(6) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 15(1)(b)(iii) amended 1 April 2018 section 55(2) section 55(6) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 15(2) amended 1 April 2018 section 55(3) section 55(6) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 15(3) amended 1 April 2018 section 55(4) section 55(6) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 15 list of defined terms decommissioning inserted 1 April 2018 section 55(5) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DT 16: Decommissioning
Deduction
1: A petroleum miner is allowed a deduction for expenditure that they incur on decommissioning 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 decommissioning deduction general limitation general permission income year petroleum miner supplement 2004 No 35 s DT 16 Section DT 16 heading replaced 1 April 2018 section 56(1) section 56(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 16(1) amended 1 April 2018 section 56(2) section 56(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 16 list of defined terms decommissioning inserted 1 April 2018 section 56(3)(a) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 16 list of defined terms removal or restoration operations repealed 1 April 2018 section 56(3)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 General provisions
DT 17: Attribution of expenditure
Petroleum mining 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) or (c)
a: the asset; and
b: the permit area to which the asset relates. Relationship between subpart and section GB 20
3: This section applies for the purposes of this subpart, section GB 20 (Arrangements involving petroleum and mineral mining) section 91 permit area petroleum permit 2004 No 35 s DT 17 Section DT 17(3) heading replaced 1 April 2018 section 57(1) section 57(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 17(3) amended 1 April 2018 section 57(2) section 57(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 17(3) amended 1 April 2014 section 40 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
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 2004 No 35 s DT 18
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 2004 No 35 s DT 19
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 or decommissioning that is
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 decommissioning New Zealand petroleum miner petroleum mining operations 2004 No 35 s DT 20 Section DT 20 amended 1 April 2018 section 58(1) section 58(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DT 20 list of defined terms decommissioning inserted 1 April 2018 section 58(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DU: Mineral mining expenditure
Subpart DU replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Contents
DU 1: Mining expenditure: prospecting and exploration expenditure
Deduction
1: A mineral miner is allowed a deduction for the following expenditure:
a: mining prospecting expenditure:
b: mining exploration expenditure, subject to sections DU 6 DU 7 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 mineral miner mining exploration expenditure mining prospecting expenditure Section DU 1 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DU 1(2) replaced 30 June 2014 section 62(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DU 1 list of defined terms capital limitation inserted 30 June 2014 section 62(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DU 2: Mining expenditure: rehabilitation expenditure
Deduction
1: A mineral miner is allowed a deduction for mining rehabilitation expenditure. Timing of deduction
2: The deduction is allocated to the income year in which the mineral miner incurs the amount of mining rehabilitation expenditure. Tax credit
3: If a mineral miner has a net mining loss for a tax year after taking into account an amount of mining rehabilitation expenditure incurred in relation to a permit area, they may have a tax credit for the amount under section LU 1 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 corresponding income year deduction general limitation general permission income year mineral miner mining rehabilitation expenditure net mining loss permit area tax credit tax year Section DU 2 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DU 3: Acquisition of land for mining operations
Deduction
1: A mineral miner is allowed a deduction for expenditure incurred in acquiring land or an interest in land for the purposes of their mining operations or associated mining operations. Exclusions
2: Subsection (1) does not apply to the following expenditure:
a: expenditure incurred on or in relation to land that—
i: does not constitute a mining permit area or land adjacent to it:
ii: does not form, or is not intended to form, part of a mining permit area or land adjacent to it:
b: expenditure referred to in section DU 8(1)
c: expenditure for which the mineral miner has a deduction before disposing of the land or interest in land:
d: residual expenditure. Timing of deduction
3: The deduction is allocated to the income year in which the mineral miner disposes of the land or interest in land. Treatment of losses on disposal of land
4: If the mineral miner has a net mining loss for a tax year after taking into account the amount derived from the disposal of the land or interest in land, they may have a tax credit for the amount of the loss on disposal under section LU 1 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 associated mining operations capital limitation deduction general limitation general permission interest income year land mineral miner mining operations net mining loss permit area residual expenditure tax credit tax year Section DU 3 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DU 4: Acquisition of mineral mining assets
Deduction for assets acquired before mining permits
1: If a person acquires a mineral mining asset before the date on which a mining permit for the permit area to which the asset relates is obtained, they are allowed a deduction for expenditure incurred in acquiring the asset. Mining development expenditure for later assets
2: If a person acquires a mineral mining asset after the date on which a mining permit for the permit area to which the asset relates is obtained, the expenditure incurred in acquiring the asset is treated as mining development expenditure. No application costs
3: For the purposes of this section, expenditure incurred does not include the cost of an application for a mining right or mining permit. 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 mineral mining asset mining development expenditure mining permit permit area Section DU 4 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DU 5: 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 fall into 1 of the classes of mining expenditure referred to in section DU 8(1) Treatment of farm-in expenditure
2: The farm-in expenditure is treated as if it were the applicable class of mining expenditure. Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation farm-in expenditure farm-out arrangement general limitation general permission Section DU 5 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DU 6: Deduction for certain mining expenditure spread over assumed life of mine
When this section applies
1: This section applies when—
a: a mineral miner—
i: incurs an amount of mining development expenditure for an income year on or in relation to their mining operations or associated mining operations in a mining permit area:
ii: has incurred an amount of mining exploration expenditure in relation to a mining permit area on acquiring or creating property for which the mineral miner has been allowed a deduction in an earlier income year, and the amount is recovered as income under section CU 4
b: the mineral miner starts to use the mining permit area to derive income; and
c: the mineral miner either does not meet the requirements to allow allocation of the expenditure under section EJ 20E No deduction (with exception)
2: The mineral miner is denied a deduction for the expenditure except to the extent quantified and allocated under section EJ 20B 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 mining operations capital limitation deduction general limitation general permission income income year mineral miner mining development expenditure mining exploration expenditure mining operations permit area Section DU 6 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DU 7: Deduction for certain mining expenditure spread on basis of units of production
When this section applies
1: This section applies when a mineral miner—
a: incurs expenditure described in section DU 6(1)(a)
b: starts to use the permit area to derive income; and
c: either—
i: uses IFRS rules to prepare their financial statements; or
ii: keeps appropriate records that are sufficient to enable the Commissioner to verify the calculations used by the mineral miner; and
d: chooses to apply this section in the way described in section EJ 20E(2) What this section does not apply to
1B: This section does not apply to an amount of mining outgoing excess of a loss-attributing qualifying company. No deduction (with exception)
2: The mineral miner is denied a deduction for the expenditure except to the extent quantified and allocated under section EJ 20E 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. associated mining operations capital limitation Commissioner deduction financial statement general limitation general permission IFRS income mineral miner mining operations permit area Section DU 7 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DU 7(1B) heading inserted 29 March 2018 section 59(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DU 7(1B) inserted 29 March 2018 section 59(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Classes of mining expenditure Heading inserted 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DU 8: Classes of mineral mining expenditure
Classes
1: Sections DU 9 to DU 12
a: mining prospecting expenditure, see section DU 9
b: mining exploration expenditure, see section DU 10
c: mining development expenditure, see section DU 11
d: mining rehabilitation expenditure, see section DU 12 No recharacterisation as mining prospecting expenditure
2: For the purposes of this subpart, subpart CU sections EJ 20B to EJ 20E GB 20 IA 7(7) IS 1 IS 2 LU 1 amount mining development expenditure mining exploration expenditure mining prospecting expenditure mining rehabilitation expenditure Section DU 8 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DU 9: Some definitions
Meaning of mining prospecting expenditure
1: Mining prospecting expenditure
a: means expenditure that a mineral miner incurs directly in relation to the acquisition of—
i: a prospecting right under the Crown Minerals Act 1991
ii: mining prospecting information, including labour, materials, services, and administrative expenses directly incurred in acquiring the information; and
b: includes prospecting for minerals by electrical, geochemical, gravimetric, magnetic, radioactive, seismic, or other geological methods; and
c: does not include—
i: the cost of land, plant, or machinery:
ii: expenditure referred to in section DU 8(1)(b) to (d)
iii: residual expenditure. Meaning of mining prospecting information
2: Mining prospecting information
a: that is about the presence, absence, extent, or volume of listed industrial minerals in an area; or
b: that is likely to assist in determining the presence, absence, extent, or volume of listed industrial minerals in an area. land listed industrial mineral mineral miner mining prospecting expenditure mining prospecting information residual expenditure Section DU 9 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DU 10: Meaning of mining exploration expenditure
Mining exploration expenditure
a: means expenditure that a mineral miner incurs in exploring or searching in New Zealand for a listed industrial mineral; and
b: includes expenditure that the mineral miner incurs directly in relation to—
i: acquiring an exploration right or permit under the Crown Minerals Act 1991
ii: geological mapping and geophysical surveys:
iii: systematic searches for areas containing listed industrial minerals:
iv: searching by drilling in areas containing listed industrial minerals:
v: searching for ore containing a listed industrial mineral within or in the vicinity of an ore body by crosscuts, drilling, drives, rises, shafts, or winzes; and
c: does not include—
i: the cost of land, plant, or machinery:
ii: expenditure referred to in section DU 8(1)(a), (c), and (d)
iii: residual expenditure. land listed industrial mineral mineral miner mining exploration expenditure residual expenditure Section DU 10 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
DU 11: Meaning of mining development expenditure: exclusion of operational expenditure
Meaning of mining development expenditure
1: Mining development expenditure
a: expenditure that a mineral miner incurs in preparing a permit area for their mining operations or associated mining operations:
b: expenditure on operations that are carried on by a mineral miner on a permit area in New Zealand for the purpose of deriving income and consist of—
i: mining for 1 or more listed industrial mineral; or
ii: performing work directly related to mining for 1 or more listed industrial mineral; or
iii: undertaking earthworks, including tailing dams, that are necessary for the working of the mine. Inclusions
2: Mining development expenditure
a: acquiring a mining right or permit under the Crown Minerals Act 1991
b: obtaining required resource consents for their mining operations or associated mining operations:
c: establishing mine infrastructure on any of the following:
i: plant or machinery, including vehicles or vessels:
ii: production equipment or facilities:
iii: storage facilities:
d: providing, or contributing to the cost of providing, communication equipment, fuel, light, power, or water in relation to their mining operations or associated mining operations in the permit area. Exclusions
3: Mining development expenditure
a: the cost of land:
b: operational expenditure:
c: expenditure on property acquired after the start of commercial production from the permit area that has an estimated useful life that does not depend on the remaining assumed life of the mine:
d: expenditure referred to in section DU 8(1)(a), (b), and (d)
e: residual expenditure. Meaning of operational expenditure
4: For the purposes of this section and section IS 2(1) operational expenditure
a: is incurred in operations carried on by a mineral miner in a mining permit area; and
b: is incurred after the start of commercial production from the mining permit area; and
c: does not create, or contribute to the creation of, an asset associated mining operations commercial production estimated useful life income land listed industrial mineral mineral miner mining development expenditure mining operations New Zealand operational expenditure permit area residual expenditure Section DU 11 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DU 11(4)(c) amended 30 June 2014 section 63(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DU 12: Meaning of mining rehabilitation expenditure
Mining rehabilitation expenditure
a: means expenditure that a mineral miner incurs in New Zealand directly in relation to rehabilitation of land that is the permit area of their mining operations or associated mining operations carried out as a result of—
i: the mineral miner's permit requirements:
ii: the requirements of an access arrangement issued under the Crown Minerals Act 1991
iii: an obligation of the mineral miner under the Resource Management Act 1991
iv: a concession under the Conservation Act 1987
v: an authority under the Historic Places Act 1993
b: includes an amount that the mineral miner pays to restore, or towards restoring, the area of their operations either during or after those operations; and
c: does not include—
i: the cost of land:
ii: expenditure referred to in section DU 8(1)(a) to (c)
iii: residual expenditure. amount associated mining operations land mineral miner mining operations New Zealand pay permit area residual expenditure Section DU 12 replaced 1 April 2014 section 41(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DU 12(a)(iii) amended 23 December 2023 section 6 Resource Management (Natural and Built Environment and Spatial Planning Repeal and Interim Fast-track Consenting) Act 2023
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 2004 No 35 s DV 1
DV 2: Transfer of expenditure to master fund
When this section applies
1: This section applies when—
a: a superannuation fund (the 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 in 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 as follows:
a: for a master fund that is a multi-rate PIE, in the income year in which the expenditure is transferred by the member superannuation fund; or
b: for other master funds, 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 Amount of deduction when master fund is multi-rate PIE
8B: Despite subsection (8), a master superannuation fund that is a multi-rate PIE is allowed a deduction for expenditure transferred to it by a member superannuation fund. However, the maximum amount transferred must be no more than the member fund's share of the taxable income of the PIE for the income year in which the amount is transferred, any excess being treated as not transferred. 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 multi-rate PIE notice return of income superannuation fund supplement 2004 No 35 s DV 2 Section DV 2(6) substituted 1 April 2010 section 102(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 2(8B) heading inserted 6 October 2009 section 102(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 2(8B) heading amended 29 March 2018 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section DV 2(8B) substituted 1 April 2010 section 102(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 2 list of defined terms investor interest repealed 21 December 2010 section 43 Taxation (GST and Remedial Matters) Act 2010 Section DV 2 list of defined terms multi-rate PIE inserted 1 April 2010 section 102(6)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 2 list of defined terms portfolio investor interest repealed 1 April 2010 section 102(6)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 2 list of defined terms portfolio tax rate entity repealed 1 April 2010 section 102(6)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DV 3: Formula for calculating maximum deduction
Formula
1: The formula referred to in section DV 2(8) taxable income − non-resident passive 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 passive income
4: Non-resident passive income section RF 2(5) amount corresponding income year deduction non-resident passive income superannuation fund tax year taxable income 2004 No 35 s DV 3
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) What this section does not apply to
1B: This section does not apply to a transfer of expenditure to a master superannuation fund that is a multi-rate PIE. KiwiSaver schemes
2: Surplus carried forward
3: The member superannuation fund carries the surplus expenditure forward to the next income 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 income year that it chooses to treat as being incurred by the master superannuation fund:
b: it calculates the maximum deduction for the income 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 income year; and
ii: applies subsections (5) to (8):
d: if the combined expenditure is more than the maximum deduction, it—
i: carries forward the new surplus expenditure to the next income year; and
ii: applies subsection (4). Surplus dealt with until gone
4: The member superannuation fund repeats the steps in subsection (3) for the following income years until all surplus expenditure is deducted. Deduction allowed to master superannuation fund
5: Expenditure treated under subsection (3)(c)(i) as incurred by the master superannuation fund in deriving income is allowed as a deduction in the income year in which it is so treated. The amount of the deduction is limited by subsection (6). Amount of deduction
6: The maximum amount of a deduction under subsection (5) is the maximum deduction for the income year, calculated using the formula in section DV 3 Deducted expenditure not incurred by member superannuation fund
7: Expenditure for which the master superannuation fund is allowed a deduction is treated as not being incurred by the member superannuation fund. Sequential deductions
8: Expenditure for which the master superannuation fund is allowed a deduction must be deducted in sequence according to the income year in which the member superannuation fund incurred it. Link with subpart DA
9: The link between this section and subpart DA
a: subsection (5) supplements the general permission and overrides the capital limitation; the other general limitations still apply:
b: subsection (7) overrides the general permission. amount assessable income capital limitation deduction general limitation general permission income income year KiwiSaver scheme multi-rate PIE superannuation fund superannuation scheme supplement 2004 No 35 s DV 4 Section DV 4(1B) heading substituted 1 April 2010 section 103(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 4(1B) substituted 1 April 2010 section 103(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 4(2) heading repealed 1 May 2011 section 56 KiwiSaver Amendment Act 2011 Section DV 4(2) repealed 1 May 2011 section 56 KiwiSaver Amendment Act 2011 Section DV 4 list of defined terms multi-rate PIE inserted 1 April 2010 section 103(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 4 list of defined terms portfolio tax rate entity repealed 1 April 2010 section 103(4)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DV 4B: Carry forward of expenditure by member funds investing in portfolio investment entities
When this section applies
1: This section applies when—
a: a master fund that is a multi-rate PIE has a deduction under section DV 2(8B)
b: the amount of the expenditure that meets the tests set out in section DV 2(2) Member fund carrying expenditure forward
2: The member fund may carry forward the surplus expenditure for transfer under section DV 2(8B) Expenditure as loss balance
3: If the member fund carries forward surplus expenditure in an income year, the member fund may treat some or all of the expenditure as a loss balance for the corresponding tax year. amount deduction income year loss balance master fund multi-rate PIE tax year Section DV 4B substituted 1 April 2010 section 104(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 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 public unit trust, or a superannuation fund (the 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 income 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
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 tax loss in the corresponding tax year, with the tax 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. Income year in which investment stops
4: In an income 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 a loss balance. When expenditure incurred
5: The expenditure referred to in subsection (3) is treated as being incurred by the master fund in the income 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 Amount of deduction when master fund is multi-rate PIE
7B: Despite subsection (7), a master fund that is a multi-rate PIE is allowed a deduction for expenditure transferred to it by a member fund. However, the maximum amount transferred must be no more than the member fund's share of the taxable income of the PIE for the income year in which the amount is transferred, any excess being treated as not transferred. 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 capital limitation category A income Commissioner deduction financial arrangement general limitation general permission group investment fund income year loss balance master fund multi-rate PIE public unit trust return of income revenue account property superannuation fund supplement tax loss tax year 2004 No 35 s DV 5 Section DV 5(7B) heading substituted 1 April 2010 section 105(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 5(7B) substituted 1 April 2010 section 105(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 5 list of defined terms investor interest repealed 21 December 2010 section 44 Taxation (GST and Remedial Matters) Act 2010 Section DV 5 list of defined terms multi-rate PIE inserted 1 April 2010 section 105(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 5 list of defined terms portfolio investor interest repealed 1 April 2010 section 105(4)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 5 list of defined terms portfolio tax rate entity repealed 1 April 2010 section 105(4)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DV 6: Formula for calculating maximum deduction
Formula used to calculate maximum deduction
1: The formula referred to in section DV 5(7) taxable income − non-resident passive 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 passive income
4: Non-resident passive income section RF 2(5) Multi-rate PIEs
5: This section does not apply to an amount of expenditure transferred to a master fund that is a multi-rate PIE. amount corresponding income year deduction master fund multi-rate PIE non-resident passive income taxable income 2004 No 35 s DV 6 Section DV 6(5) heading substituted 1 April 2010 section 106(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 6(5) substituted 1 April 2010 section 106(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 6 list of defined terms multi-rate PIE inserted 1 April 2010 section 106(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 6 list of defined terms portfolio tax rate entity repealed 1 April 2010 section 106(4)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DV 7: Carry forward of expenditure
When this section applies
1: This section applies when a member superannuation fund incurs expenditure that is more than—
a: the member fund and master fund agree can be transferred; or
b: the maximum amount that can be transferred. Member fund carrying expenditure forward
1B: The member fund may carry forward the expenditure for transfer in a later income year. Expenditure as loss balance
2: If the member fund carries forward expenditure in an income year, the member fund may treat some or all of the expenditure as a loss balance for the corresponding tax year. income year loss balance master fund tax year 2004 No 35 s DV 7 Section DV 7(1) heading substituted 6 October 2009 section 107(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 7(1) substituted 6 October 2009 section 107(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 7(1B) heading inserted 6 October 2009 section 107(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 7(1B) inserted 6 October 2009 section 107(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
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 in the absence of this section. 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 2004 No 35 s DV 8
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 an income year, beneficiary income of beneficiaries of the trust in the income 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 income year supplement trustee trustee income 2004 No 35 s DV 9
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 pay terminating share withdrawable share 2004 No 35 s DV 10
DV 11: 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 34B or CZ 41 Amount of deduction
2: The amount of the deduction is the amount of the distribution that is excluded by section CD 34B or CZ 41 Timing of deduction
3: The deduction is allocated to the income year to which the distribution relates 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 2004 No 35 s DV 10B Section DV 11(1) amended 28 March 2024 section 51(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DV 11(1) amended 7 September 2010 section 24(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DV 11(2) amended 28 March 2024 section 51(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section DV 11(2) amended 7 September 2010 section 24(2) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DV 11(3) amended 7 September 2010 section 24(3) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
DV 12: 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 charitable or other public benefit gift that it makes to a donee organisation No deduction
1B: Despite subsection (1), a Maori authority is not allowed a deduction for the amount of a donation it makes or for the amount of a charitable or other public benefit gift it makes, to the extent to which the amount is, for the Maori authority, an asset ignored for the purposes of section HR 12 section HR 12(3)(a) Amount of deduction
2: The deduction for the total of all donations and gifts made in an income 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 charitable or other public benefit gift deduction donee organisation general limitation general permission income year Maori authority net income supplement tax year 2004 No 35 s DV 11 Section DV 12(1)(b) amended 6 January 2010 section 108(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DV 12(1)(b) amended 1 April 2008 section 348(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DV 12(1B) heading inserted 18 March 2019 section 155 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section DV 12(1B) inserted 18 March 2019 section 155 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section DV 12(2) amended 1 April 2008 section 348(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DV 12 list of defined terms donee organisation inserted 6 January 2010 section 108(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DV 13: Group companies
When this section applies
1: This section applies when,—
a: in an income 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 income 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 income year supplement wholly-owned group of companies 2004 No 35 s DV 12
DV 14: Amalgamated company: expenditure on improvements for farming, horticultural, aquacultural, and forestry businesses
When this section applies
1: This section applies when—
a: an amalgamating company ends its existence on a resident’s restricted 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 5 DO 6 DO 12 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 5 DO 6 DO 12 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 resident’s restricted amalgamation supplement 2004 No 35 s DV 13
DV 15: Amalgamated companies: property passing on resident’s restricted amalgamation
When this section applies
1: This section results from sections FO 8 FO 10 Deduction for bad debts or expenditure or loss
2: On a resident’s restricted amalgamation, an amalgamated company is allowed a deduction for an amount written off as bad, or an amount of expenditure or loss, including an amount of depreciation loss, incurred as a result of something that the amalgamating company did or did not do in the circumstances set out in section FO 8 Depreciation loss for property transferred
3: On a resident’s restricted amalgamation, an amalgamating company is allowed a deduction for an amount of depreciation loss for property transferred to the amalgamated company for the period described in section FO 10(7) Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. amalgamated company amalgamating company amount deduction depreciation loss general permission resident’s restricted amalgamation 2004 No 35 ss FE 3 FE 6A
DV 16: Consolidated groups: intra-group transactions
When this section applies
1: This section applies in relation to a consolidated group of companies for the purposes of section FM 10 No deduction (with exception)
2: A company that is a part of a consolidated group of companies is denied a deduction for expenditure or loss incurred through a payment or disposal to, or transaction or arrangement with, another group company, and a deduction would not be allowed for the expenditure or loss if the group were 1 company, except to the extent to which the expenditure or loss arises—
a: from the company’s acquisition of trading stock; or
b: under sections FM 15 to FM 23 Other expenditure or loss
3: A company that is part of a consolidated group is—
a: allowed a deduction for expenditure or loss or an amount of depreciation loss:
b: denied a deduction for expenditure or loss or amount of depreciation loss except to the extent to which the expenditure or loss is interest on money that the company has borrowed outside the consolidated group. Link with subpart DA
4: This section overrides the general permission. amount arrangement company consolidated group deduction depreciation loss general permission interest pay 2004 No 35 s HB 2(1)(b), (d)
DV 17: Consolidated groups: expenditure or loss incurred by group companies
When this section applies
1: This section results from sections FM 11 FM 12 Deduction allowed: nexus with income derivation
2: To the extent set out in section FM 11 No deduction except for interest on money borrowed
3: To the extent set out in section FM 12 Link with subpart DA
4: Subsection (2) supplements the general permission, and the general limitations still apply. Subsection (3) overrides the general permission. amount arrangement company consolidated group deduction depreciation loss general permission loss pay 2004 No 35 s HB 2(1)(c)
DV 18: Statutory producer boards and co-operative companies
When this section applies
1: This section applies for the purposes of sections OB 73 OB 78 OB 78B No deduction
2: The producer board or co-operative company making the distribution is denied a deduction for the amount of the distribution. Link with subpart DA
3: This section overrides the general permission. amount co-operative company deduction general permission imputation credit statutory producer board 2004 No 35 ss ME 30(2) ME 35(2) Section DV 18(1) amended 26 June 2019 section 60 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
DV 18B: Cost base for shares when debt
remitted For a shareholder of a company that is a calculation company under section CD 43(6B) or (6C) section YC 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 18B inserted 30 March 2017 section 51(1) section 51(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section DV 18B heading amended 30 March 2022 section 77 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
DV 19: Association rebates
When this section applies
1: This section applies when an association—
a: enters into a mutual transaction with a member
b: in relation to the transaction, pays an association rebate to a member. Deduction
2: The association is allowed a deduction for the lesser of—
a: the amount described in subsection (4); and
b: the amount calculated using the formula in subsection (5). Allocation
3: The deduction is allowed in the income year corresponding to the accounting year for which the association rebate is paid. Amount paid
4: The amount referred to in subsection (2)(a) is the total amount that the association pays as association rebates to members for those mutual transactions with members Amount under formula
5: The amount is calculated using the formula— assessable income − (deductions + amount distributed). Definition of items in formula
6: In the formula,—
a: assessable income mutual transactions with members
b: deductions assessable income referred to in paragraph (a)
c: amount distributed section OB 82(1)(a) Statutory producer boards’ deductions
7: When an association is a statutory producer board that pays an association rebate to a member—
a: the amount allowed as a deduction is the amount referred to in subsection (4):
b: the board may choose whether the rebate is a deduction in the income year in which the amount is paid, or in the income year in which the mutual transaction giving rise to the amount is made. Link with subpart DA
8: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. accounting year amount assessable income association association rebate capital limitation deduction general permission imputation credit income income year member mutual transaction net income net loss pay share statutory producer board 2004 No 35 s HF 1(2), (3)(a), (b), (4) Section DV 19(1) substituted 7 September 2010 section 25(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DV 19(1)(a) amended 29 August 2011 section 20(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DV 19(2)(a) amended 18 March 2019 section 156(1) section 156(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section DV 19(3) substituted 7 September 2010 section 25(2) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DV 19(4) amended 29 August 2011 section 20(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DV 19(6)(a) amended 29 August 2011 section 20(3)(a) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DV 19(6)(b) amended 29 August 2011 section 20(3)(b) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DV 19 list of defined terms accounting year inserted 7 September 2010 section 25(3) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Partners and partnerships Heading inserted 1 April 2008 section 10(1) Taxation (Limited Partnerships) Act 2008
DV 20: Partners
A person who is a partner is allowed a deduction for expenditure or loss to the extent to which the deduction results from the application of subpart HG amount deduction partner partnership Section DV 20 inserted 1 April 2008 section 10(1) Taxation (Limited Partnerships) Act 2008
DZ 20B: Expenditure incurred while income-earning activity interrupted by North Island flooding event
When this section applies
1: This section applies for a person and an income year (the current year
a: the person has an income-earning activity in New Zealand immediately before a North Island flooding event; and
b: the activity is interrupted for a period (the period of interruption
c: in the current year, during the period of interruption, the person incurs expenditure or loss (the interruption expenditure
d: the interruption expenditure does not meet the requirements of the general permission for the person and the income-earning activity but would do so but for the interruption; and
e: the person resumes the income-earning activity in an income year (the resumption year Deduction for interruption expenditure
2: The person is allowed a deduction for the interruption expenditure. Timing of deduction
3: The deduction is allocated to the resumption year. Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. deduction general limitation general permission income year loss New Zealand North Island flooding events supplement Section DZ 20B inserted 28 March 2024 section 52(1) section 52(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
DV 21: Losses for QCs entering partnership regime
When this section applies
1: This section applies to a person when,—
a: for an income year, a person's partnership (the partnership
b: ignoring the application of section HZ 4B(3) relevant transitional income year Losses extinguished
2: Despite section HZ 4B(3) Part I Deduction
3: The person is allowed a deduction for an amount equal to an amount given by the formula in subsection (4), to the extent to which it is equal to or less than the net income the person would have for the income year if they were treated as having only income and deductions arising from the application of subpart HG Deduction formula
4: For the purposes of subsection (3), the amount is calculated using the formula— (loss balance extinguished − subsequent deductions) × partnership share. Definition of items in formula
5: In the formula,—
a: loss balance extinguished
b: subsequent deductions
c: partnership share Exception
6: Despite subsection (3), a person is not allowed a deduction for an amount in subsection (4) to the extent to which—
a: it arises from an amount carried forward under subparts IA IQ
b: it is greater than the maximum amount they may subtract from their net income under subpart IQ Link with subpart DA
7: This section overrides the general permission and the general limitations. amount attributed CFC net loss company deduction FIF net loss general limitation general permission income income year loss balance net income partnership partnership share QCP transitional process qualifying company Section DV 21 inserted 1 April 2011 section 45(1) Taxation (GST and Remedial Matters) Act 2010 Look-through companies Heading inserted 1 April 2011 section 45(1) Taxation (GST and Remedial Matters) Act 2010
DV 22: Owners of look-through companies
A person who has an effective look-through interest for a look-through company has a deduction to the extent to which a deduction results from the application of subpart HB deduction effective look-through interest look-through company Section DV 22 inserted 1 April 2011 section 45(1) Taxation (GST and Remedial Matters) Act 2010
DV 23: Losses for QCs entering look-through companies rules
When this section applies
1: This section applies to a person who has an effective look-through interest for a look-through company (the LTC
a: the LTC was a qualifying company that first becomes a look-through company for the first or second income year that starts on or after 1 April 2011; and
b: but for becoming a look-through company and the application of section HB 3 relevant transitional income year Deduction
2: The person is allowed a deduction for an amount equal to an amount given by the formula in subsection (3), to the extent to which it is equal to or less than the net income the person would have for the income year if they were treated as having only income and deductions arising from the application of subpart HB (Look-through companies) for the LTC. Deduction formula
3: For the purposes of subsection (2), the amount is calculated using the formula— (loss balance extinguished − subsequent deductions) × effective interest. Definition of items in formula
4: In the formula,—
a: loss balance extinguished
b: subsequent deductions
c: effective interest Exception
5: Despite subsection (2), a person is denied a deduction for an amount in subsection (3) to the extent to which—
a: it arises from an amount carried forward under subparts IA IQ
b: it is greater than the maximum amount they may subtract from their net income under subpart IQ subpart HB Link with subpart DA
6: This section overrides the general permission and the general limitations. amount attributed CFC net loss deduction effective look-through interest FIF net loss general limitation general permission income income year look-through company loss balance net income qualifying company Section DV 23 inserted 1 April 2011 section 45(1) Taxation (GST and Remedial Matters) Act 2010 Sole traders Heading added 1 April 2011 section 45(1) Taxation (GST and Remedial Matters) Act 2010
DV 24: Losses for QCs becoming sole traderships
When this section applies
1: This section applies to a person when,—
a: for an income year, the person's sole tradership has effectively replaced a qualifying company under a QCST transitional process; and
b: ignoring the application of section HZ 4D(3) relevant transitional income year Losses extinguished
2: Despite section HZ 4D(3) Part I Deduction
3: The person is allowed a deduction for an amount equal to an amount given by the formula in subsection (4). Deduction formula
4: For the purposes of subsection (3), the amount is calculated using the following formula: loss balance extinguished − subsequent deductions. Definition of items in formula
5: In the formula,—
a: loss balance extinguished
b: subsequent deductions Exception
6: Despite subsection (3), a person is denied a deduction for an amount in subsection (4) to the extent to which—
a: it arises from an amount carried forward under subparts IA IQ
b: it is greater than the maximum amount they may subtract from their net income under subpart IQ Link with subpart DA
7: This section overrides the general permission and the general limitations. amount attributed CFC net loss deduction FIF net loss general limitation general permission income income year loss balance net income QCST transitional process qualifying company Section DV 24 added 1 April 2011 section 45(1) Taxation (GST and Remedial Matters) Act 2010
DV 25: Hedging of currency movements in Australian non-attributing shares and attributing FDR method interests
Deduction
1: A person is allowed a deduction for the amount of expenditure that the person has under section EM 6 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. amount deduction general limitation general permission Section DV 25 inserted 17 July 2013 section 35 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Reinstatement of R&D tax losses Heading inserted 24 February 2016 section 111(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DV 26: Deduction for reinstatement of R&D tax losses
Deduction
1: A person is allowed a deduction for the amount given by section MX 7(7) Allocation of deduction
2: The deduction is allocated to the income year in which the person incurs the expenditure of the R&D repayment tax. Link with subpart DA
3: This section overrides the general permission and the general limitations. deduction general limitation general permission income year R&D repayment tax Section DV 26 inserted 24 February 2016 section 111(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Employee share schemes Heading inserted 29 September 2018 section 61 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DV 27: Employee share schemes
When this section applies
1: This section applies when a person is party to an employee share scheme. No deduction except as provided by this section
2: Except as provided by this section, the person is denied a deduction for an amount of expenditure or loss for an income year incurred in relation to the employee share scheme. Interest, establishment and management
3: Subsection (2) does not apply to an amount of expenditure or loss to the extent to which the amount relates to—
a: a loan or interest:
b: establishing or managing the employee share scheme. Deduction under section CE 2(3)
4: The person is allowed a deduction for the amount of the deduction they are allowed under section CE 2(3) Employment income
5: The person is allowed a deduction for an amount of expenditure or loss incurred on employment income other than under section CE 1(1)(d) Deduction for benefit
6: If the person is the employing or contracting company for an employee share scheme beneficiary described in section CE 7(a)(i) or (ii) employee Formula
7: For the purposes of subsection (6), the amount of the expenditure or loss is the positive amount calculated using the formula— employee amount − previous deductions. Definition of items in formula
8: In the formula,—
a: employee amount section CE 2(1)
b: previous deductions
i: in relation to the employee amount; and
ii: before the date that is 6 months after the date of Royal assent for the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Income
9: A negative amount calculated using the formula in subsection (7) is an amount of income of the person. Link with subpart DA
10: Subsection (4) supplements the general permission. Subsection (4) overrides the employment limitation. amount associated person company deduction employee share scheme employee share scheme beneficiary employment income employment limitation general permission income income year interest loan share Section DV 27 inserted 29 September 2018 section 61 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DV 28: Exempt employee share schemes
When this section applies
1: This section applies when a person is party to an exempt ESS. No deduction
2: The person is denied a deduction for expenditure or loss in relation to the exempt ESS, except to the extent to which the expenditure or loss relates to establishing or managing the exempt ESS. exempt ESS deduction Section DV 28 inserted 29 March 2018 section 62(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
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 sections HR 5 HR 6 Link with subpart DA
3: This section overrides the general permission. airport operator deduction expenditure general permission income joint venture agreement 2004 No 35 s DW 1
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 disposal of
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 2004 No 35 s DW 2 Section DW 2(2)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DW 3: Non-resident general insurers and shippers
No deduction
1: A person listed in subsection (2) is denied a deduction for expenditure incurred in deriving the income described in the relevant section. Persons
2: The persons referred to in subsection (1) are—
a: a non-resident person who derives income under section CR 3
b: a non-resident person who derives income under section CV 16 New Zealand.
c: Non-resident shipper’s expenditure on depreciation
3: The non-resident person referred to in subsection (2)(b) has no amount of depreciation loss in relation to that income. Link with subpart DA
4: This section overrides the general permission. amount deduction depreciation loss film general permission income insurer New Zealand non-resident 2004 No 35 ss FC 15 FC 20 FC 21(3), (5) Section DW 3 heading replaced 2 November 2012 section 26(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DW 3(2)(b) amended 2 November 2012 section 26(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DW 3(2)(c) repealed 2 November 2012 section 26(3) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
DW 3B: Lloyd’s of London: deductions for life insurance business
No deductions
1: Lloyd’s of London is denied a deduction for expenditure incurred in deriving income under section CR 3B Link with subpart DA
2: This section overrides the general permission. deduction general permission income Lloyd’s of London premium Section DW 3B inserted 29 March 2018 section 63(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
DW 4: Deduction for general insurance outstanding claims reserve
When this section applies
1: This section applies for—
a: an insurer who—
i: uses IFRS 4, Appendix D , or IFRS 17
ii: is a life insurer who has general insurance contracts; and
b: general insurance contracts, excluding contracts having premiums to which section CR 3 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 denied 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 opening outstanding claims reserve − closing 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 , if none of subparagraphs (ii), (iii), and (iv) applies
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; or
iii: 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 for general insurance contracts, if the insurer is a general insurer and the current year is the first year in which the insurer adopts IFRS 17 for general insurance contracts; or
iv: 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 for general insurance contracts, if the insurer is a life insurer with general insurance contracts who does not adopt IFRS 17 in the current year and the current year is the first year in which the insurer applies the definition of present value (gross) section EY 24(5)
b: closing outstanding claims reserve Contracts transferred to insurer
4B: If a person (the transferor contract section ED 3(1B) unreported claim events + reported claims unpaid + risk adjustment Definition of items in formula in subsection (4B)
4C: In the formula in subsection (4B),—
a: unreported claim events
i: taking into account the probability of the claims being paid and the future expenses for administering the claims; and
ii: after subtracting the present value of relevant reinsurance claims of the insurer:
b: reported claims unpaid
i: taking into account the probability of the claims being paid and the future expenses for administering the claims; and
ii: after subtracting the present value of relevant reinsurance claims of the insurer:
c: risk adjustment appropriate adjustment the adjustment
i: is actuarially determined; and
ii: reflects the uncertainty of the estimates arising from the use of the relevant best estimate assumptions; and
iii: is not already included in the risk components of the claims. 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 for the income year. Link with subpart DA
6: This section supplements the general permission. The general limitations still apply, except that the capital limitation does not apply for general insurance contracts after they are transferred to an insurer actuarially determined amount best estimate assumptions capital limitation deduction general insurance general limitation general permission IFRS 4 IFRS 17 income year insurer life insurer New Zealand resident non-resident outstanding claims reserve pay present value (gross) Section DW 4 added 6 October 2009 section 109(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DW 4(1)(a)(i) amended 31 March 2023 section 49(1) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DW 4(1B) heading inserted 17 July 2013 section 36(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DW 4(1B) inserted 17 July 2013 section 36(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DW 4(4)(a)(i) amended 31 March 2023 section 49(2) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DW 4(4)(a)(ii) amended 31 March 2023 section 49(3) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DW 4(4)(a)(iii) inserted 31 March 2023 section 49(4) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DW 4(4)(a)(iv) inserted 31 March 2023 section 49(4) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DW 4(4B) heading inserted 1 April 2014 section 42(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DW 4(4B) inserted 1 April 2014 section 42(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DW 4(4B) formula amended 31 March 2023 section 49(5) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DW 4(4C) heading inserted 1 April 2014 section 42(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DW 4(4C) inserted 1 April 2014 section 42(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DW 4(4C)(c) amended 31 March 2023 section 49(6)(a) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DW 4(4C)(c) amended 31 March 2023 section 49(6)(b) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DW 4(4C)(c) amended 31 March 2023 section 49(6)(c) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DW 4(6) amended 2 November 2012 section 27(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DW 4 list of defined terms actuarially determined inserted 1 April 2014 section 42(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DW 4 list of defined terms best estimate assumptions inserted 1 April 2014 section 42(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DW 4 list of defined terms capital limitation inserted 2 November 2012 section 27(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DW 4 list of defined terms general insurance inserted 1 April 2014 section 42(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DW 4 list of defined terms general insurance contract repealed 7 September 2010 section 26(b) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DW 4 list of defined terms IFRS 17 inserted 31 March 2023 section 49(7) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section DW 4 list of defined terms New Zealand resident inserted 1 April 2014 section 42(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DW 4 list of defined terms non-resident inserted 1 April 2014 section 42(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DW 4 list of defined terms pay inserted 7 September 2010 section 26(a) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section DW 4 list of defined terms present value (gross) inserted 31 March 2023 section 49(7) section 49(8) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
DW 5: Aircraft operators: aircraft engines and aircraft engine overhauls
When this section applies
1: This section applies for a person when—
a: the person carries on a business involving the operation of an aircraft that includes an aircraft engine; and
b: the person is required to maintain and repair the aircraft engine and pieces of the aircraft engine, when operating the aircraft, and to perform successive aircraft engine overhauls of the aircraft engine at intervals no greater than the scheduled overhaul period for the aircraft engine. Deduction for aircraft engine overhaul
2: For expenditure incurred by the person in carrying out an aircraft engine overhaul of an aircraft engine—
a: the person has a deduction to the extent to which the process does not produce a significant increase in the performance of the aircraft engine by comparison with the aircraft engine’s performance specifications before the aircraft engine overhaul:
b: an amount for which the person does not have a deduction under paragraph (a)—
i: is an increase in the cost of the aircraft to the person, if the aircraft engine is an unpriced aircraft engine; or
ii: is an increase in the cost of the aircraft engine to the person, otherwise. Deduction for aircraft engine when acquired for price
3: A person who acquires an aircraft engine for use with an aircraft, other than as an unpriced aircraft engine with the aircraft, has a deduction of an amount given by subsection (4)
a: for expenditure incurred in acquiring the aircraft engine, if the aircraft engine is acquired other than under a finance lease; or
b: for part of the value of the aircraft engine determined under section EW 32 Amount of deduction under subsection (3)
4: The amount of the person’s deduction under subsection (3)
a: equal to the estimated cost of an aircraft engine overhaul for the aircraft engine at the time of the acquisition, if—
i: when the aircraft engine is acquired, the aircraft engine has not been used significantly since being manufactured or having an aircraft engine overhaul; and
ii: the estimated cost is less than the amount referred to in paragraph (c); or
b: equal to a fraction, calculated from the proportion of the scheduled overhaul period for the aircraft engine that is unexpired when the aircraft engine is acquired, of the estimated cost of an aircraft engine overhaul for the aircraft engine at the time of the acquisition, if the fraction of the estimated cost is less than the amount referred to in paragraph (c); or
c: equal to the expenditure incurred in acquiring the aircraft engine, if the amount is not given by paragraph (a) or (b). Deduction for unpriced aircraft engine when acquired
5: A person who acquires an aircraft including an unpriced aircraft engine has a deduction of an amount given by subsection (6)
a: for part of the expenditure incurred in acquiring the aircraft, if the aircraft is acquired other than under a finance lease; or
b: for part of the value of the aircraft determined under section EW 32 Amount of deduction under subsection (5)
6: The amount of the person’s deduction under subsection (5)
a: equal to the estimated cost of an aircraft engine overhaul for the aircraft engine at the time of the acquisition, based on market prices, if the aircraft engine, when acquired, has not been used significantly since being manufactured or having an aircraft engine overhaul; or
b: equal to a fraction, calculated from the proportion of the scheduled overhaul period for the aircraft engine that is unexpired when the aircraft is acquired, of the estimated cost of an aircraft engine overhaul for the aircraft engine at the time of the acquisition based on market prices; or
c: equal to a fraction, agreed with the Commissioner, of the expenditure incurred in acquiring the aircraft including the unpriced aircraft engine. Exception: person making election under section EJ 26
7: If a person has made an election under section EJ 26
a: the person is not allowed a deduction referred to in subsection (3) or (5); and
b: each aircraft engine of the person is an unpriced aircraft engine for the purposes of this section. Expenditure on piece fitted to aircraft in aircraft engine overhaul
8: The amount of expenditure incurred by a person, in carrying out an aircraft engine overhaul, for a piece that is fitted as a replacement piece to the aircraft as part of the aircraft engine overhaul is—
a: the adjusted tax value of the piece for the person before the piece is fitted, if the piece is an item of depreciable property before being fitted:
b: the portion of the person’s expenditure on the piece that is unexpired before the piece is fitted, otherwise. Link with subpart DA
9: This section overrides the capital limitation. The other general limitations still apply. adjusted tax value aircraft engine aircraft engine overhaul business capital limitation deduction depreciable property finance lease general limitation scheduled overhaul period unpriced aircraft engine Section DW 5 inserted 1 April 2017 section 52(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
DW 6: Aircraft operators: payments and adjustments under finance leases
When this section applies
1: This section applies when a person leasing under a finance lease an aircraft engine, or an aircraft including an unpriced aircraft engine, meets the requirements of section DW 5(1) Payments during lease to lessor towards aircraft engine maintenance
2: If, during the term of the lease, the person pays an amount under the lease to the lessor towards the cost of aircraft engine overhauls,—
a: the person does not have a deduction for the payment; and
b: a payment of a corresponding amount by the lessor to the person when the person incurs expenditure in performing an aircraft engine overhaul of the aircraft engine is not income of the person. Deduction for surplus payments
3: If, at the end of the lease, the total amount of the payments referred to in subsection (2)(a) subsection (2)(b) Payments at end of lease by or to lessor for aircraft engine maintenance
4: If the lease requires the person to pay to the lessor, or the lessor to pay to the person, at the end of the lease an amount that is calculated from the cost of an aircraft engine overhaul and the proportion of the scheduled overhaul period for the aircraft engine that is expired when the lease ends,—
a: an amount that the person is required to pay is allowed as a deduction of the person; and
b: an amount that the person is entitled to receive is income of the person under section CG 4(2) Relationship with section CG 4
5: This section overrides section CG 4 aircraft engine aircraft engine overhaul deduction finance lease lease lessor pay scheduled overhaul period unpriced aircraft engine Section DW 6 inserted 1 April 2017 section 52(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
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 acquired
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 an income year to the amount that would be the net income of the owner for the corresponding tax year if the owner’s only income in the income 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 acquire
b: includes a person who is entitled to the property under—
i: an order of a court under the Family Protection Act 1955; or
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 income year net income pay private limitation supplement tax year 2004 No 35 s DX 1 Section DX 1(3)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DX 1(5)(a)(ii) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DX 2: Tax credits: conduit financing arrangements
Section DX 2 repealed 6 October 2009 section 110(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DX 3: Tax credits: supplementary dividend holding companies
Section DX 3 repealed 1 October 2012 section 17(1) Taxation (International Investment and Remedial Matters) Act 2012
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, and derive income under 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 relationship agreement supplement 2004 No 35 s DZ 1
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 pay property superannuation category 1 scheme superannuation fund superannuation policy superannuation scheme 2004 No 35 s DZ 2
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) if it has been deducted under—
a: section DZ 4
b: sections 214D to 214M of the Income Tax Act 1976 as they were immediately before their repeal by 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 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 2004 No 35 s DZ 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 earlier 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 an existing privilege that is a mining licence under Part 1 of the Petroleum Act 1937 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 existing privilege exploratory well general limitation general permission income year petroleum miner petroleum mining operations seal and abandonment 2004 No 35 s DZ 4 Section DZ 4(2)(b) amended 24 February 2016 section 112(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 earlier income year. The deduction is allowed under section DT 1 DT 5 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 DT 5 to DT 7 sections EJ 12 to EJ 16 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 (3)
a: residual expenditure; and
b: expenditure incurred on or before the date on which the application for an existing privilege that is a prospecting licence under Part 1 of the Petroleum Act 1937 or a
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 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 existing privilege 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 permit residual expenditure supplement transferee transferor 2004 No 35 s DZ 5 Section DZ 5(5) amended 24 February 2016 section 113(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DZ 5(5)(b) amended 24 February 2016 section 113(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DZ 6: Partnership interests and disposal of part of asset before 16 December 1991
In sections DZ 3 to DZ 5
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 2004 No 35 s DZ 6
DZ 7: Petroleum mining operations outside New Zealand before 16 December 1991
Sections DZ 3 to DZ 6
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 2004 No 35 s DZ 7
DZ 8: Acquiring When this section applies
1: This section applies when a person acquires acquiring Deduction
2: The person is allowed a deduction of the amount quantified in section EZ 7(2) Acquiring 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 2004 No 35 s DZ 8 Section DZ 8 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DZ 8(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section DZ 8(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DZ 9: Premium paid on land leased before 1 April 1993
When this section applies
1: This section applies when a person ( person A Deduction
2: Person A is allowed a deduction of the amount quantified in section EZ 8(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 2004 No 35 s DZ 9
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 2004 No 35 s DZ 10
DZ 11: Film reimbursement scheme on or before 30 June 2001
Film reimbursement scheme
1: Section DS 3 person A
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 of paragraphs (c) and (d) were met; and
f: the expenditure for which persons are allowed a deduction under section DS 1 DS 2
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 14 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 24, 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 24, 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 14 Link with subpart DA
4: This section overrides the general permission. amount Commissioner completed deduction depreciable intangible property film film reimbursement scheme general permission government stock income income tax New Zealand notice pay physical cost of production tax year year 2004 No 35 s DZ 11
DZ 12: Mineral mining: 1954–2005
Section DZ 12 repealed 1 April 2014 section 43 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
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 a deduction under section DO 4(1) of the Income Tax Act 1994, of an amount set out in section DO 4(3)(a) or (c) of that Act, for expenditure incurred in carrying on a farming or agricultural business on land in New Zealand; and
b: at the end of the 2004–05 income year, part of the expenditure (the unamortised balance Deduction
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 2004 No 35 s DZ 13
DZ 14: Deductions under specified leases
When this section applies
1: This section applies for the purposes of sections FZ 2 FZ 4 Lessor
2: In an income year in which a lessor leases a personal property lease asset to a lessee under a specified lease, the lessor is denied a deduction for an amount of depreciation loss for the asset. Lessee
3: A lessee under a specified lease is denied a deduction for expenditure incurred by them under the lease except to the extent to which the expenditure—
a: would be allowed as a deduction to the lessee under section BD 2
b: is no more than the sum of the amounts calculated under section FZ 3(2)(a) Link with subpart DA
4: This section overrides the general permission. amount deduction depreciation loss general permission income year initial period instalment period lessee lessor personal property lease asset specified lease 2004 No 35 ss FC 6(4) FC 8
DZ 15: Patent applications before 1 April 2005
When this section applies
1: This section applies when—
a: a patent is granted to a person in their 2005–06 income year or a 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 denied 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— (months of ownership ÷ 240) × cost. Definition of items in formula
3: In the formula,—
a: months of ownership
b: cost 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 2004 No 35 s DZ 14
DZ 16: Geothermal wells between 31 March 2003 and 17 May 2006
When this section applies
1: This section applies to a person’s geothermal well when—
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 denied under another provision. Deduction
2: In the income year in which the well’s geothermal energy proving period ends, the person is allowed 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 permission geothermal energy proving period geothermal well income year supplement 2004 No 35 s DZ 15
DZ 17: Expenditure on improvements to aquacultural business before 1995–96 income year
When this section applies
1: This section applies in an income year when a person incurs expenditure—
a: before the 1995–96 income year in making an improvement for the purposes of an aquacultural business; and
b: for which they would be allowed under section DO 12 Deduction
2: The person is allowed a deduction in the income year of an amount calculated using the formula— 125% × schedule percentage × diminished value. Definition of items in formula
3: In the formula,—
a: schedule percentage schedule 20, parts B to F
b: diminished value 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 diminished value general limitation general permission income year 2004 No 35 s DZ 16
DZ 18: Expenditure on improvements to forestry land before 1995–96 income year
When this section applies
1: This section applies in an income year when a person incurs expenditure—
a: before the 1995–96 income year in making an improvement on land; and
b: for which they would be allowed under section DP 3 Deduction
2: The person is allowed a deduction in the income year of an amount calculated using the formula— 125% × schedule percentage × diminished value. Definition of items in formula
3: In the formula,—
a: schedule percentage schedule 20
b: diminished value 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 deduction diminished value general limitation general permission income year land 2004 No 35 s DZ 17
DZ 19: Attributed CFC loss carried back under section EZ 32C
Section DZ 19 repealed 2 November 2012 section 28(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
DZ 20: Expenditure incurred while income-earning activity interrupted by Canterbury earthquake
When this section applies
1: This section applies for a person and an income year (the current year 2024–25
a: the person has an income-earning activity in greater Christchurch (as defined in section 4
b: the activity is interrupted for a period (the period of interruption
c: in the current year, during the period of interruption, the person incurs expenditure or loss (the interruption expenditure
d: the interruption expenditure does not meet the requirements of the general permission for the person and the income-earning activity but would do so but for the interruption; and
e: the person resumes the income-earning activity in an income year (the resumption year 2024–25 Deduction for interruption expenditure
2: The person is allowed a deduction for the interruption expenditure. Timing of deduction
3: The deduction is allocated to the resumption year. Link with subpart DA
4: This section supplements the general permission; the general limitations still apply. deduction general limitation general permission income income year loss Section DZ 20 replaced 1 April 2016 section 44(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section DZ 20(1) amended 18 March 2019 section 157 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section DZ 20(1)(e) amended 18 March 2019 section 157 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
DZ 21: Transfer in 2013–14 income year of assets to which subpart DG applies
When this section applies
1: This section applies when—
a: a company has on 31 March 2013 an asset described in section DG 3
b: the asset is transferred before the end of the company's 2013–14 income year to—
i: 1 or more of the company's shareholders in proportion to their shareholding:
ii: 1 or more of the shareholders of a shareholder in proportion to their shareholding; and
c: the company chooses to apply this section. Disposal by transferor
2: For the purposes of section CG 1 subpart EE
a: the company is treated as disposing of the asset for an amount equal to the adjusted tax value of the asset on the day of the transfer; and
b: the shareholder is treated as having—
i: acquired the asset on the date on which the company acquired it for an amount equal to the amount the company paid to acquire it; and
ii: used the asset for the purposes for which the company used it; and
iii: used the depreciation method used by the company in relation to the asset; and
iv: been allowed a deduction for an amount of depreciation loss that the company has been allowed since the company's acquisition of the asset. Allocation to shareholders
(3): For the purposes of subsection (2), if more than 1 shareholder referred to in subsection (1)(b) acquires the asset, their share of the cost of the asset and the amount of depreciation loss is based on the proportion of their voting interests in the company. Example
On 31 March 2013, Boat Co has a boat with an acquisition cost of $85,000. The boat meets the various requirements set out in subpart DG. and Michelle is treated as acquiring it for $85,000, and having been allowed a deduction of $30,000 for depreciation loss in past income years adjusted tax value amount asset company deduction depreciation loss income year pay shareholder voting interest Section DZ 21 inserted 17 July 2013 section 37 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DZ 21 heading replaced 30 June 2014 section 58(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DZ 21(2) heading replaced 30 June 2014 section 58(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DZ 21(2) replaced 30 June 2014 section 58(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DZ 21(3) heading inserted 30 June 2014 section 58(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DZ 21(3) inserted 30 June 2014 section 58(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DZ 21 example amended 30 June 2014 section 59 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DZ 21 list of defined terms deduction inserted 30 June 2014 section 58(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DZ 21 list of defined terms depreciation loss inserted 30 June 2014 section 58(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DZ 21 list of defined terms pay inserted 30 June 2014 section 58(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section DZ 21 list of defined terms voting interest inserted 30 June 2014 section 58(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
DZ 22: Aircraft maintenance: aircraft engines acquired before 2017–18 income year
When this section applies
1: This section applies when—
a: a person, before the 2017–18 income year, acquires an aircraft engine or an aircraft including an unpriced aircraft engine; and
b: the person is required to perform aircraft engine overhauls of the aircraft engine when operating the aircraft; and
c: the adjusted tax value of the aircraft engine or aircraft is reduced at the beginning of the 2017–18 income year by an amount under section EZ 23BA
d: the person does not make an election under section EJ 26 Deduction if aircraft engine overhaul since acquisition
2: If the person has performed an aircraft engine overhaul of the aircraft engine before the beginning of the 2017–18 income year, the person has a deduction for the 2017–18 income year of an amount equal to the amount of the reduction referred to in subsection (1)(c). Deduction in absence of aircraft engine overhaul since acquisition
3: If the person has not performed an aircraft engine overhaul of the aircraft engine before the beginning of the 2017–18 income year, the person has a deduction,—
a: for the 2017–18 income year, of an amount equal to the amount of the reduction referred to in subsection (1)(c), reduced by an amount that, as a proportion of the reduction, corresponds to the proportion of the scheduled overhaul period for the aircraft engine that is unexpired at the end of the 2017–18 income year:
b: for an income year later than the 2017–18 income year, of an amount that, as a proportion of the reduction referred to in subsection (1)(c), corresponds to the proportion of the scheduled overhaul period of the aircraft engine that is included in the income year. adjusted tax value aircraft engine aircraft engine overhaul deduction income year scheduled overhaul period unpriced aircraft engine Section DZ 22 inserted 1 April 2017 section 53(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
DZ 23: Aircraft maintenance: tax accounting provisions for expenditure incurred after 2016–17 income year
When this section applies
1: This section applies when a person has at the beginning of the 2017–18 income year an amount (the anticipated deduction Expenditure on aircraft maintenance other than aircraft engine overhauls
2: For the earliest income year, after the 2016–17 income year, in which the person incurs expenditure on the maintenance of an aircraft other than an aircraft engine overhaul, the person—
a: is not allowed a deduction for the expenditure to the extent to which the expenditure in the income year is offset by an anticipated deduction for expenditure on such maintenance; and
b: if the anticipated deduction for such expenditure exceeds the amount of the expenditure in the income year, derives income under section CZ 34 Expenditure on aircraft engine overhauls
3: For income years after the 2016–17 income year in which the person incurs expenditure on an aircraft engine overhaul, beginning with the earliest such income year,—
a: the person is not allowed a deduction for the expenditure to the extent to which the expenditure in the income year is offset by an anticipated deduction for expenditure on an aircraft engine overhaul; and
b: if the anticipated deduction exceeds the amount of the expenditure in the income year, the excess is carried forward as an anticipated deduction to the next income year in which the person incurs expenditure on an aircraft engine overhaul; and
c: paragraphs (a) and (b) apply as required to income years until the amount of the anticipated deduction at the beginning of the 2017–18 income year is offset completely. aircraft engine overhaul deduction income income year taxable income Section DZ 23 inserted 1 April 2017 section 53(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
DZ 24: Amounts denied before 1 April 2025: treatment upon disposal of certain residential property
Disposal subject to section CB 6A: denied amount included as cost
1: An amount that has been denied as a deduction for property under section DH 8 section DB 23 section CB 6A Disposal not subject to section CB 6A: denied amount allocated under subpart EL
2: An amount that has been denied as a deduction for property under section DH 8 subpart EL
a: is income under a section other than section CB 6A
b: is not income under section CB 6A amount deduction income income year residential rental property Section DZ 24 inserted 1 April 2025 section 53 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
E: Timing and quantifying rules
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
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 49
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 49 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 pay revenue account property share-lending right share supplier trading stock 2004 No 35 s EA 1
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
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 under a specified lease or a lease to which section EJ 10
f: property that arises as a result of petroleum development expenditure or petroleum exploration expenditure to which sections DT 1 DT 5 EJ 12 to EJ 20
fb: property that arises as a result of mining development expenditure or mining exploration expenditure to which sections EJ 20B to EJ 20E
fc: property fitted to an aircraft engine as part of an aircraft engine overhaul to which section DW 5
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. aircraft engine aircraft engine overhaul deduction excepted financial arrangement film film right financial arrangement income year lease pay petroleum development expenditure petroleum exploration expenditure revenue account property specified lease trading stock 2004 No 35 s EA 2 Section EA 2(1)(e) replaced 29 March 2018 section 64(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EA 2(1)(f) amended 29 March 2018 section 64(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EA 2(1)(fb) inserted 1 April 2014 section 45 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section EA 2(1)(fc) inserted 1 April 2017 section 54(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EA 2 list of defined terms aircraft engine inserted 1 April 2017 section 54(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EA 2 list of defined terms aircraft engine overhaul inserted 1 April 2017 section 54(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
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
db: a leasehold estate, or licence to use land, to which section EI 4B
e: a film or a film right to which sections EJ 4 to EJ 8
f: a specified lease or a lease to which section EJ 10
g: property that arises as a result of petroleum development expenditure or petroleum exploration expenditure to which sections EJ 12 to EJ 20
gb: property that arises as a result of mining development expenditure or mining exploration expenditure to which sections EJ 20B to EJ 20E
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 50 , if subsection (4B) 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. Expenditure on goods used in aircraft engine overhaul
4B: The unexpired portion of expenditure on pieces that are fitted to an aircraft engine as part of an aircraft engine overhaul is treated as being expenditure incurred in carrying out the aircraft engine overhaul for the purposes of sections DW 5 DW 6 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 16B to CW 16F CW 17 CW 17B CW 17C CW 17CB CW 17CC CW 17D CW 18 Commissioner’s discretionary relief
8: The Commissioner may excuse a person from complying with this section under section 91AAC aircraft engine aircraft engine overhaul amount Commissioner deduction employee film film right goods income income year land leasehold estate pay revenue account property services 2004 No 35 s EA 3 Section EA 3(2)(db) inserted 17 July 2013 section 38(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EA 3(2)(gb) inserted 1 April 2014 section 46 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section EA 3(3)(b) amended 1 April 2017 section 55(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EA 3(4B) heading inserted 1 April 2017 section 55(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EA 3(4B) inserted 1 April 2017 section 55(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EA 3(7) amended 1 April 2025 section 45 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section EA 3(7) amended 1 April 2015 section 64 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EA 3(7) amended 6 October 2009 section 111 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EA 3 list of defined terms aircraft engine inserted 1 April 2017 section 55(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EA 3 list of defined terms aircraft engine overhaul inserted 1 April 2017 section 55(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EA 3 list of defined terms land inserted 17 July 2013 section 38(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EA 3 list of defined terms leasehold estate inserted 17 July 2013 section 38(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
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
ib: the income year, if they choose, in a return of income, to not use paragraph (i) or (ii); 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 51 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) Disposal
4: For the purposes of this section, a person (the seller disposes of buyer disposal
a: the seller and the buyer are not associated persons at the time of the disposal
b: the seller has incurred the obligation to pay the amount in the course of their business, whether or not it remains a contingent obligation at the time of the disposal
c: the employee becomes an employee of the buyer under the disposal
d: the seller and the buyer agree in writing, under the disposal
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 seller’s provision for the obligation. Disposal
5: If subsection (4) would have applied but for the fact that the seller and the buyer are associated at the time of the disposal
a: the amount of employment income is not treated as income of the seller in any income year following the disposal section CH 3
b: the seller is denied a deduction for the amount of employment income in any income year following the disposal section DB 51
c: the buyer may be allowed a deduction under section DC 10(3) Disposal No disposal
6: If section DC 11
a: the amount of employment income is not treated as income of the transferor ( person A disposal section CH 3
b: the transferor is denied a deduction for the amount of employment income in any income year following the disposal section DB 51
c: the transferee ( person B section DC 11 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 disposal
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 pay return of income shareholder-employee time of the disposal 2004 No 35 s EA 4 Section EA 4(1)(b)(ib) inserted 1 April 2017 section 79(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section EA 4(4) heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(4) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(4)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(4)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(4)(c) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(4)(d) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(5) heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(5) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(5)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(5)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(5)(c) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(6) heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(6)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(6)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4(7) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4 list of defined terms time of the disposal inserted 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EA 4 list of defined terms time of the sale repealed 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EA 5: Income from disposal of original shares under share-lending arrangements
When this section applies
1: This section applies when a person—
a: is a share user under a share-lending arrangement; and
b: derives an amount of income in an income year from the disposal of an original share under the share-lending arrangement to a person other than the share supplier or a person associated with the share supplier; and
c: has a deduction in the following income year (the later income year Allocation of income
2: The amount of income derived by the person may be allocated to the later income year. amount associated person deduction identical share income income year original share share-lending arrangement share supplier share user Section EA 5 inserted 30 March 2025 section 46(1) section 46(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
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 2004 No 35 s EB 1
EB 2: Meaning of trading stock
Meaning
1: Trading stock Inclusions
2: Trading stock
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 FA 15
ii: is an asset of a business that the lessor carries on. Exclusions
3: Trading stock
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:
e: an excepted financial arrangement held by a person if section CX 55 Proceeds from disposal of investment shares
f: livestock not used in a dealing business:
g: consumable aids to be used in the process of producing trading stock:
h: a spare part not held for sale or exchange:
i: an emissions unit:
j: a greenhouse gas unit that is not an emissions unit. business depreciable property emissions unit excepted financial arrangement financial arrangement greenhouse gas unit hire purchase agreement income land lessor life insurer trading stock 2004 No 35 s EB 2 Section EB 2(3)(e) amended 1 April 2010 section 112(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EB 2(3)(h) amended 26 September 2008 section 72(1) Climate Change Response (Emissions Trading) Amendment Act 2008 Section EB 2(3)(i) substituted 6 October 2009 section 112(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EB 2(3)(j) replaced 30 November 2020 section 280 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section EB 2 list of defined terms emissions unit inserted 6 October 2009 section 112(3)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EB 2 list of defined terms ETS unit repealed 6 October 2009 section 112(3)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EB 2 list of defined terms greenhouse gas unit inserted 30 November 2020 section 280 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section EB 2 list of defined terms non-Kyoto greenhouse gas unit repealed 30 November 2020 section 280 Climate Change Response (Emissions Trading Reform) Amendment Act 2020
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 49 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 2004 No 35 s EB 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 2004 No 35 s EB 4
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 part 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 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
d: company A and company B remain part 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 part of group
3: If the companies stop being part 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 2004 No 35 s EB 5 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 or as described in subsection (1B)(b) 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 Definition
3: In this section, NZIAS 41 in effect under the Financial Reporting Act 2013 closing stock cost generally accepted accounting practice NZIAS 2 NZIAS 41 2004 No 35 s EB 6 Section EB 6(1) amended 1 April 2008 section 349(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(1B) heading inserted 1 April 2008 section 349(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(1B) inserted 1 April 2008 section 349(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(2) amended 1 April 2008 section 349(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(3) heading inserted 1 April 2008 section 349(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(3) inserted 1 April 2008 section 349(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(3) amended 1 April 2014 section 126 Financial Reporting (Amendments to Other Enactments) Act 2013 Section EB 6 list of defined terms NZIAS 2 inserted 1 April 2008 section 349(5) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6 list of defined terms NZIAS 41 inserted 1 April 2008 section 349(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 2004 No 35 s EB 7
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 or exchanged business closing stock cost financial statements income year low-turnover trader trading stock 2004 No 35 s EB 8 Section EB 8(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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). Secondary legislation
5B: An Order in Council under subsection (5) is secondary legislation ( see Part 3 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 2004 No 35 s EB 9 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EB 9(3)(a) amended 1 April 2008 section 350(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 9(5B) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EB 9(5B) inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EB 9 list of defined terms NZIAS 2 inserted 1 April 2008 section 350(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 2004 No 35 s EB 10
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 2004 No 35 s EB 11
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 2004 No 35 s EB 12 Section EB 12 amended 1 April 2008 section 351(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 12 list of defined terms NZIAS 8 inserted 1 April 2008 section 351(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 sections YB 2 YB 3
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). Secondary legislation
4: An Order in Council under this section is secondary legislation ( see Part 3 associated person business closing stock income year low-turnover trader turnover 2004 No 35 s EB 13 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EB 13(2) amended 1 April 2010 section 113(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EB 13(4) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EB 13(4) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
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 2004 No 35 s EB 14
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 2004 No 35 s EB 15
EB 16: Cost allocation: cost-flow method for low-turnover traders
Section EB 7(1) to (5) cost low-turnover trader 2004 No 35 s EB 16
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 or exchanged amount business closing stock cost depreciation loss financial statements income year low-turnover trader trading stock 2004 No 35 s EB 17 Section EB 17(3) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 acquisition cost
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 2004 No 35 s EB 18 Section EB 18(2)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 2004 No 35 s EB 19 Section EB 19(4)(a) amended 1 April 2008 section 352(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 19 list of defined terms NZIAS 2 inserted 1 April 2008 section 352(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 2004 No 35 s EB 20
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 2004 No 35 s EB 21
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 and for this purpose, 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 2004 No 35 s EB 22 Section EB 22(1) amended 1 April 2008 section 353(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 22 list of defined terms NZIAS 8 inserted 1 April 2008 section 353(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Low value trading stock
EB 23: Valuing closing stock under
$10,000 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 $10,000 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 2004 No 35 s EB 23 Section EB 23 heading amended 1 April 2009 section 5(1) Taxation (Business Tax Measures) Act 2009 Section EB 23(1)(b) amended 1 April 2009 section 5(2) Taxation (Business Tax Measures) Act 2009 Disposal of business assets Heading repealed 1 April 2024 section 54 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
EB 24: Apportionment on disposal of business assets that include trading stock
Section EB 24 repealed 1 April 2024 section 54 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
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 livestock when—
a: a person who owns or carries on a farming business, other than a livestock dealing business, holds livestock for the purposes of farming that livestock in the ordinary course of carrying on the farming business:
b: a person who owns livestock bails that livestock to another person under a bailment, lease, or other agreement. 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 2004 No 35 s EC 1 Section EC 1(1) heading replaced 2 November 2012 section 30(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EC 1(1) replaced 29 March 2025 section 47(1) section 47(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025
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 49 income year 2004 No 35 s EC 2
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 2004 No 35 s EC 3
EC 4: 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 part 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 part 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 part of group
3: If the companies stop being part of the same wholly-owned 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 2004 No 35 s EC 5
EC 4B: Compulsory use of herd scheme method for associated persons
When this section applies
1: This section applies if, in an income year (the current year transferor transfer transferee When this section does not apply
2: This section does not apply to the transfer of livestock if,—
a: the transferor and the transferee would not be associated if the transferee or an associate were not the descendants in relation to the transferor or an associate of the transferor; and
b: the transfer is at market value and the transfer’s consideration is wholly on arm’s length commercial terms and conditions, ignoring terms and conditions relating to financing; and
c: for the transferor and associates of the transferor, but excluding their descended associates,—
i: all of their specified livestock in the income year of the transfer have been disposed of; and
ii: they do not derive income from the disposal of specified livestock that are part of a farming business in the next 4 income years. When this section does not apply: deceased treated as alive and transferor
3: This section does not apply if it would not apply treating a transfer of livestock to or from the estate of a deceased or under a will of a deceased as a transfer made by the deceased immediately before their death to the relevant transferee. However, this subsection does not apply if the will of the deceased creates a life interest in the relevant livestock. Compulsory use of herd scheme method
4: Despite sections EC 7(2) EC 12(1) EC 22(1) EC 25(1) Formula
5: The formula, for the purposes of subsections (1) and (4), is— hypothetical end herd scheme amount − minimum herd scheme amount. Definition of items in formula
6: In the formula,—
a: hypothetical end herd scheme amount
i: the number of animals in the current year that the person would have of a class (the relevant class
ii: the number of animals of the relevant class that the person valued under the herd scheme at the end of the year before the current year:
b: minimum herd scheme amount Definitions
7: In this section,—
a: descendant
b: descended associate
i: an associate (the associate
ii: an associate (the associate amount associated class descendant descended associate herd scheme income year notice Section EC 4B inserted 17 July 2013 section 39 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
EC 4C: Value and timing of transfers
When this section applies
1: This section applies to a transfer (the transfer section EC 4B Same tax year
2: If the transfer occurs in the same tax year for both the transferor and transferee, then the transfer is treated as a disposal and acquisition at the value of the relevant livestock under the herd scheme at the end of the transferor's corresponding income year. Different tax year
3: If the transfer occurs in different tax years for the transferor and transferee, then subsection (4) or (5) applies. Different tax year: transferee earlier
4: If the transferee acquires the relevant livestock in a tax year earlier than the tax year in which the transferor disposes of it, then the transfer is treated as a disposal and acquisition at the value of the relevant livestock under the herd scheme at the beginning of the transferor's corresponding income year. Different tax year: transferee later
5: If the transferee acquires the relevant livestock in a tax year (the later tax year
a: the transfer is treated as a disposal and acquisition at the value of the relevant livestock under the herd scheme at the end of the transferor's corresponding income year:
b: for the purposes of the transferee's opening value under section EC 16 herd scheme income year specified livestock tax year Section EC 4C inserted 17 July 2013 section 39 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
EC 5: 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. 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. market value self-assessed adverse event 2004 No 35 s EC 5B Valuation of specified livestock
EC 6: Application of sections EC 7 to EC 27
Sections EC 7 to EC 27 specified livestock 2004 No 35 s EC 6
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 to EC 10 Exception to subsection (2): express
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 2004 No 35 s EC 7 Section EC 7(5) heading replaced 17 July 2013 section 40(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 7(5) replaced 17 July 2013 section 40(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 7(6) heading inserted 17 July 2013 section 40(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 7(6) heading amended 2 June 2016 section 13 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EC 7(6) inserted 17 July 2013 section 40(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 7 list of defined terms notice inserted 17 July 2013 section 40(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
EC 8: Restrictions arising from use of herd scheme
First restriction
1: A valuation method other than the herd scheme is not available to a person, in an income year after the 2011–12 income year, for a type of specified livestock if the person—
a: gives a notice of election, with application beginning for or before the income year, to use the herd scheme for the type of specified livestock; and
b: does not give before 18 August 2011 a later notice of election, with application beginning for or before the income year, to use another valuation method for the type of specified livestock. First exception: election after 18 August 2011 for fattening business
2: Despite subsection (1), a valuation method other than the herd scheme is available to a person in an income year after the 2011–12 income year, if—
a: the person gives a notice of election as described in subsection (1)(a); and
b: the person gives, on or after 18 August 2011, a later notice of election to use another valuation method for the relevant type of specified livestock (the livestock
c: the later notice is given, with application beginning for the income year (the starting income year
d: the livestock are used in a fattening farming business for and after the starting income year. Second exception: increase in a class
3: Despite subsection (1), a valuation method other than the herd scheme is available to a person in an income year, to the extent of a person's animals of a class, in an income year (the current year A definition and a formula
4: Class closing animal balance last year’s class amount + associated class transfers. Definition of items in formula
5: In the formula,—
a: last year's class amount
b: associated class transfers section EC 4B(5) Second restriction
6: 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. amount class class closing animal balance cost price herd scheme income year national standard cost scheme notice Section EC 8 replaced 17 July 2013 section 41(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8(3) heading replaced 17 July 2013 section 41(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8(3) replaced 17 July 2013 section 41(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8(4) heading replaced 17 July 2013 section 41(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8(4) replaced 17 July 2013 section 41(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8(5) heading inserted 17 July 2013 section 41(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8(5) inserted 17 July 2013 section 41(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8(6) heading inserted 17 July 2013 section 41(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8(6) inserted 17 July 2013 section 41(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8 list of defined terms amount inserted 17 July 2013 section 41(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8 list of defined terms class closing animal balance inserted 17 July 2013 section 41(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 8 list of defined terms notice inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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 notice profit-sharing arrangement specified livestock type 2004 No 35 s EC 9 Section EC 9 list of defined terms notice inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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 notice profit-sharing arrangement short-term bailment specified livestock type 2004 No 35 s EC 10 Section EC 10 list of defined terms notice inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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 ; and
c: a later election, described in section EC 8(2)(b) and (c) 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 2004 No 35 s EC 11 Section EC 11(2)(b) amended 17 July 2013 section 42 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 11(2)(c) inserted 17 July 2013 section 42 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
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. Look-through company owners' interests
5: For the purposes of an election under this section, a person's interest for a look-through company that owns livestock is treated separately from any other interest that the person has in livestock. Separate elections are required for the person's owner's 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 look-through company national standard cost scheme owner's interests profit-sharing arrangement specified livestock type 2004 No 35 s EC 12 Section EC 12(5) heading added 1 April 2011 section 46(1) Taxation (GST and Remedial Matters) Act 2010 Section EC 12(5) added 1 April 2011 section 46(1) Taxation (GST and Remedial Matters) Act 2010 Section EC 12 list of defined terms look-through company inserted 1 April 2011 section 46(2) Taxation (GST and Remedial Matters) Act 2010 Section EC 12 list of defined terms owner's interests inserted 1 April 2011 section 46(2) Taxation (GST and Remedial Matters) Act 2010
EC 13: Changes in partnership interests
When this section applies
1: This section applies when—
a: a partnership owns specified livestock (the old partnership
b: a new partnership is formed (the new partnership
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 2004 No 35 s EC 13 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 2004 No 35 s EC 14
EC 15: Determining national average market values
Determined by Commissioner
1: The Commissioner must determine a national average market value schedule 17 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. Secondary legislation
3: A determination under subsection (1) is secondary legislation ( see Part 3 class Commissioner income year national average market value specified livestock 2004 No 35 s EC 15 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication It is not required to be published LA19 s 73(2) Presentation It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EC 15(3) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EC 15(3) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
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 49(3) herd livestock herd scheme herd value herd value ratio income year 2004 No 35 s EC 16 Section EC 16(3) amended 29 August 2011 section 22(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— Σ(average value × number) ÷ Σ(herd value × number). Definition of items in formula
7: In the formula,—
a: Σ
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 2004 No 35 s EC 17
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 2004 No 35 s EC 18
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. Secondary legislation
4: The instrument that sets or varies an adjustment under subsection (3) is secondary legislation ( see Part 3 Commissioner herd livestock herd scheme herd value herd value ratio income year livestock on the Chatham Islands notice type 2004 No 35 s EC 19 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication It is not required to be published LA19 s 73(2) Presentation It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EC 19(4) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EC 19(4) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
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 the disposal of specified livestock
b: disposes of specified livestock before the 1 November
c: When this section does and does not apply
1B: This section does not apply when, in an income year, a person's specified livestock is disposed of, and section EC 4B(4) section EC 4C(4) 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 2004 No 35 s EC 20 Section EC 20(1)(a) amended 17 July 2013 section 43(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 20(1)(b) amended 17 July 2013 section 43(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 20(1)(c) repealed 17 July 2013 section 43(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 20(1B) heading inserted 17 July 2013 section 43(4) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 20(1B) inserted 17 July 2013 section 43(4) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
EC 21: Herd livestock on death before values determined
Section EC 21 repealed 17 July 2013 section 44 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 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 2004 No 35 s EC 22
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 18
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. Secondary legislation
3: A determination under subsection (1) is secondary legislation ( see Part 3 Commissioner income year specified livestock 2004 No 35 s EC 23 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication It is not required to be published LA19 s 73(2) Presentation It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EC 23(3) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EC 23(3) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
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 18 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 18 section EC 23
c: the number of livestock acquired other than by way of being homebred acquisition Content of determination
3: The matters that may be included in the determination are set out in section 91AAD Secondary legislation
4: A determination under subsection (1) is secondary legislation ( see Part 3 Commissioner income year national standard cost scheme specified livestock 2004 No 35 s EC 24 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication It is not required to be published LA19 s 73(2) Presentation It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EC 24(2)(c) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 24(4) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EC 24(4) inserted 28 October 2021 section 3 Secondary Legislation Act 2021 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 section EC 10 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 2004 No 35 s EC 25
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 livestock
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 pay specified livestock 2004 No 35 s EC 26 Partnerships: cost price and national standard cost scheme Heading inserted 6 October 2009 section 114(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EC 26B: Entering partners' cost base
When this section applies
1: This section applies when an entering partner has acquired specified livestock that includes female breeding livestock for which section HG 10 Existing cost base
2: For the specified livestock, the entering partner is treated as having the same existing cost base that the exiting partner would have had for the purposes of the cost price method or national standard cost scheme for an income year, if they had not disposed of the interests. Addition to cost base
3: For the purposes of determining the value of the specified livestock at the end of an income year for the purposes of section EC 2 current year livestock cost base difference × current year count ÷ allowed years. Definition of items in formula
4: In the formula,—
a: livestock cost base difference
b: current year count
i: is the allowed years reduced by the number of years between the current year and the income year in which the entering partner's acquisition of the specified livestock occurred, ignoring years in which the partners do not use the cost price method or national standard cost scheme (for example: current year count 1 4
ii: may equal the allowed years (for example: the current year is the same year as the income year in which the entering partner's acquisition of the specified livestock occurred), but must not be a negative number:
c: allowed years
i: 4, if the partners acquire or dispose of any partnership interests that include any livestock after the entering partner's acquisition of the specified livestock and before the end of the income year in which that acquisition occurred; or
ii: 5, if the partners do not acquire or dispose of any partnership interests that include any livestock after the entering partner's acquisition of the specified livestock and before the end of the income year in which that acquisition occurred. amount cost price dispose entering partner exiting partner income year national standard cost scheme partner partner's interest specified livestock Section EC 26B inserted 6 October 2009 section 114(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EC 26B list of defined terms entering partner inserted 30 March 2017 section 56 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EC 26B list of defined terms exiting partner inserted 30 March 2017 section 56 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 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 2004 No 35 s EC 27 Valuation of non-specified livestock
EC 28: Application of sections EC 29 to EC 31
Sections EC 29 to EC 31 non-specified livestock 2004 No 35 s EC 28
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. Secondary legislation
3: A determination under subsection (1) is secondary legislation ( see Part 3 Commissioner income year non-specified livestock standard value type 2004 No 35 s EC 29 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication It is not required to be published LA19 s 73(2) Presentation It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EC 29(3) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EC 29(3) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
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 2004 No 35 s EC 30
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, acquires more non-specified livestock that—
i: is not replacement livestock; and
ii: is not homebred livestock; and
iii: is valued at its standard value. Closing value
2: The closing value of the livestock acquired
a: for the income year in which the livestock was acquired
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 2004 No 35 s EC 31 Section EC 31(1)(b) replaced 24 February 2016 section 114(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 31(2) amended 24 February 2016 section 114(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 31(2)(a) amended 24 February 2016 section 114(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 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 2004 No 35 s EC 32
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. Secondary legislation
4: A determination under subsection (1) is secondary legislation ( see Part 3 class Commissioner depreciation percentage estimated residual market value estimated useful life high-priced livestock income year type 2004 No 35 s EC 33 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication It is not required to be published LA19 s 73(2) Presentation It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EC 33(4) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EC 33(4) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
EC 34: General rule
Value in income year of acquisition
1: The closing value of high-priced livestock at the end of the income year in which it is acquired Straight-line method
2: When a person has chosen to use the straight-line method, the reduction is calculated using the formula— cost price × 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 12
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 sections EC 35 EC 36 amount class cost price depreciation percentage diminishing value equivalent high-priced livestock income year national average market value 2004 No 35 s EC 34 Section EC 34(1) heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 34(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 class cost price herd scheme high-priced livestock income year national average market value national standard cost scheme specified livestock type year 2004 No 35 s EC 35
EC 36: Immature livestock and recently
acquired 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 acquired Recently acquired
2: This section also applies to high-priced livestock that is acquired
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 2004 No 35 s EC 36 Section EC 36 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 36(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 36(2) heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 36(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EC 37: Bailment
In section EC 26 high-priced livestock specified livestock 2004 No 35 s EC 37 Valuation of bloodstock
EC 38: Application of sections EC 39 to EC 48
Sections EC 39 to EC 48 bloodstock 2004 No 35 s EC 38
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: acquires 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: acquires Prospective breeders’ bloodstock to which this section applies
2B: This section also applies to stud-founding bloodstock at the end of the prospective bloodstock breeder’s first income year in which the stud-founding bloodstock is 2 years of age. 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 5 EZ 6 bloodstock broodmare business cost price income year prospective bloodstock breeder stud-founding bloodstock year 2004 No 35 s EC 39 Section EC 39(1)(c) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 39(2)(c) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 39(2B) heading inserted 18 March 2019 section 158(1) section 158(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EC 39(2B) inserted 18 March 2019 section 158(1) section 158(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EC 39 list of defined terms prospective bloodstock breeder inserted 18 March 2019 section 158(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EC 39 list of defined terms stud-founding bloodstock inserted 18 March 2019 section 158(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EC 39B: Stud-founding bloodstock and related terms
Meaning of stud-founding bloodstock
1: Stud-founding bloodstock
a: the prospective bloodstock breeder acquires the high-priced bloodstock before it is 2 years of age; and
b: within 4 months after the day on which the prospective bloodstock breeder acquires the high-priced bloodstock—
i: the prospective bloodstock breeder notifies the Commissioner of their intention to use the high-priced bloodstock for breeding bloodstock for profit; and
ii: information as the Commissioner requires is provided to the Commissioner; and
c: the high-priced bloodstock is registered in the New Zealand Stud Book or in the New Zealand Harness Racing Stud Book. Meaning of high-priced bloodstock
2: High-priced bloodstock
a: is sold, when a yearling, at a premier yearling sale for an amount greater than the relevant national minimum price threshold for the calendar year in which the sale occurs; and
b: is expected, when sold at the premier yearling sale, to be capable of being used for breeding when it reaches maturity. Meaning of prospective bloodstock breeder
3: A prospective bloodstock breeder
a: when they do not have an existing bloodstock breeding business; and
b: with the intention of—
i: having the bloodstock first raced in New Zealand; and
ii: using the bloodstock for breeding bloodstock in New Zealand for profit. Meaning of premier yearling sale
4: A premier yearling sale schedule 18B Meaning of national minimum price threshold
5: National minimum price threshold section EC 39C section EZ 6B bloodstock business Commissioner high-priced bloodstock national minimum price threshold New Zealand premier yearling sale prospective bloodstock breeder stud-founding bloodstock Section EC 39B inserted 18 March 2019 section 159(1) section 159(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EC 39B(5) replaced 1 January 2020 section 160 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EC 39C: Setting and publication of national minimum price threshold
Setting of national minimum price threshold
1: The Commissioner must set a national minimum price threshold for each class of bloodstock set out in schedule 18C threshold year
a: for each class of the standardbred breed of horses,—
i: for each of the 3 calendar years immediately preceding the threshold year, calculating the value at the 97th percentile of sale prices for that class at the premier yearling sales in the calendar year; and
ii: dividing the sum of the 3 percentile values calculated in subparagraph (i) by 3; and
iii: rounding the amount calculated in subparagraph (ii) to the nearest multiple of $1,000, with the amount being rounded up if it ends in $500:
b: for each class of the thoroughbred breed of horses,—
i: for each of the 3 calendar years immediately preceding the threshold year, calculating the value at the 95th percentile of sale prices for that class at the premier yearling sales in the calendar year; and
ii: dividing the sum of the 3 percentile values calculated in subparagraph (i) by 3; and
iii: rounding the amount calculated in subparagraph (ii) to the nearest multiple of $1,000, with the amount being rounded up if it ends in $500. When national minimum price threshold must be set and published
2: The Commissioner must set and publish the national minimum price threshold that applies for a calendar year before the first premier yearling sale in that calendar year is held. Consequence of late setting and publication of national minimum price threshold
3: This subsection applies when the Commissioner does not set and publish the national minimum price threshold that applies for a calendar year before the first premier yearling sale in that calendar year is held. For sales of bloodstock yearlings at the premier yearling sales that occur before the Commissioner has set and published the national minimum price threshold that applies for that calendar year, the national minimum price threshold for each class of bloodstock set out in schedule 18C section EZ 6B section EC 39B(2) bloodstock Commissioner national minimum price threshold premier yearling sale Section EC 39C inserted 1 January 2020 section 161(1) section 161(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
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 5 EZ 6 bloodstock cost price income year 2004 No 35 s EC 40
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 relationship agreement section FB 18
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 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% of its cost price in the first income year and 75% 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 on or after 1 April 2001
4: For the purposes of sections EC 39 EC 40 section EC 39(2) 1.25 × cost price of broodmare ÷ (9 − age of broodmare). 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. Relationship with section EZ 5
6: This section is overridden by section EZ 5 bloodstock broodmare Commissioner company cost price income year New Zealand notice relationship agreement return of income stallion wholly-owned group year 2004 No 35 s EC 41 Section EC 41 heading amended 1 April 2008 section 354(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EC 41(1)(b) substituted 1 April 2008 section 354(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EC 41(1B) heading inserted 1 April 2008 section 354(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EC 41(1B) inserted 1 April 2008 section 354(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EC 41(1B)(a) amended 24 February 2016 section 115(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 41 list of defined terms matrimonial agreement repealed 24 February 2016 section 115(2)(a) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 41 list of defined terms relationship agreement inserted 24 February 2016 section 115(2)(b) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 Broodmare when first used on or after 1 April 2001
2: For the purposes of sections EC 39 EC 40 section EC 39(2) section EC 41 cost price of broodmare ÷ (9 − age of broodmare). Definition of item in formula
3: 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 section EZ 6
4: This section is overridden by section EZ 6 bloodstock broodmare cost price income year stallion year 2004 No 35 s EC 42
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 2004 No 35 s EC 43
EC 44: Other bloodstock
If sections EC 39 to EC 43 bloodstock cost price 2004 No 35 s EC 44
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 2004 No 35 s EC 45
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 or exchange 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 or exchange 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 or exchange sale or exchange Application to Commissioner
4: The application must be made apply bloodstock business Commissioner income year 2004 No 35 s EC 46 Section EC 46(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 46(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 46(3) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 46(4) amended 2 June 2016 section 14(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EC 46 list of defined terms apply inserted 2 June 2016 section 14(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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 or exchange Use in business
2: If a bloodstock owner who is in the business of breeding bloodstock for sale or exchange acquired acquisition bloodstock business 2004 No 35 s EC 47 Section EC 47(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 47(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EC 47B: Removal of high-priced bloodstock from New Zealand after earlier deductions
When this section applies
1: This section applies when—
a: high-priced bloodstock is removed from New Zealand before being—
i: first raced in New Zealand:
ii: used for breeding in New Zealand; and
b: a person who is a prospective bloodstock breeder has been allowed a deduction in relation to the high-priced bloodstock. Treatment as disposal
2: The person is treated as having disposed of the high-priced bloodstock. deduction high-priced bloodstock New Zealand prospective bloodstock breeder Section EC 47B inserted 18 March 2019 section 162(1) section 162(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EC 47C: When prospective breeders treated as being in breeding business
Prospective breeders treated as being in breeding business
1: A prospective bloodstock breeder is treated as having, and carrying on, a bloodstock breeding business on and from the day on which the prospective bloodstock breeder acquires stud-founding bloodstock until the earliest of the following days:
a: the day on which the prospective bloodstock breeder commences a bloodstock breeding business using the stud-founding bloodstock:
b: the day on which the prospective bloodstock breeder is treated as having disposed of the stud-founding bloodstock under section EC 47(1)
c: the day on which the prospective bloodstock breeder is treated as having disposed of the stud-founding bloodstock under section EC 47B
d: the day on which the prospective bloodstock breeder is treated as having disposed of the stud-founding bloodstock under section EC 47D
e: the day on which the prospective bloodstock breeder commences a bloodstock breeding business using bloodstock that are not stud-founding bloodstock, if the Commissioner has approved an application under section EC 47E Other bloodstock not part of breeding business
2: Despite subsection (1), if the prospective bloodstock breeder owns bloodstock that are not stud-founding bloodstock during the period of time described in that subsection, those bloodstock are not treated as part of the prospective bloodstock breeder’s bloodstock breeding business. bloodstock business Commissioner prospective bloodstock breeder stud-founding bloodstock Section EC 47C inserted 18 March 2019 section 162(1) section 162(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EC 47D: Change of prospective bloodstock breeders’ expectation or intention after earlier deductions
When this section applies
1: This section applies when—
a: a person owns high-priced bloodstock that they acquired as a prospective bloodstock breeder; and
b: the person has been allowed a deduction in relation to the high-priced bloodstock; and
c: the person has not used the high-priced bloodstock for breeding bloodstock in New Zealand for profit; and
d: the person—
i: no longer expects that the high-priced bloodstock will be able to be used for future breeding:
ii: no longer intends to use the high-priced bloodstock for breeding bloodstock in New Zealand for profit. Treatment as disposal at market value
2: The person is treated as having disposed of the high-priced bloodstock. The disposal is treated as having occurred at the high-priced bloodstock’s market value on the day on which the person’s expectation or intention first changed. deduction high-priced bloodstock prospective bloodstock breeder Section EC 47D inserted 18 March 2019 section 162(1) section 162(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EC 47E: Prospective breeders commencing actual breeding businesses
When this section applies
1: This section applies when, ignoring section EC 47C Stud-founding bloodstock subsumed into breeding business
2: If the bloodstock owner owns stud-founding bloodstock they acquired as a prospective bloodstock breeder, they may apply to the Commissioner to have the stud-founding bloodstock treated as being used in the course of the business. Application to Commissioner
3: The application must be made with the supporting information that the Commissioner requires within 1 month after the day on which the business commenced. Effect of application being approved
4: If the Commissioner approves the application, sections CG 8B CG 8C EC 47B to EC 47D apply bloodstock business Commissioner prospective bloodstock breeder stud-founding bloodstock Section EC 47E inserted 18 March 2019 section 162(1) section 162(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EC 48: Replacement breeding stock
When this section applies
1: This section applies when—
a: a bloodstock owner—
i: disposes of bloodstock (the breeding stock sale or exchange
ii: acquires 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, breeding stock that they had previously used for breeding in the course of a business of breeding bloodstock for sale or exchange acquired
ii: acquires Amount determined
2: The bloodstock owner may apply to the Commissioner to determine the amount that the bloodstock owner has applied in acquiring 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 acquired amount apply bloodstock business Commissioner income income year pay 2004 No 35 s EC 48 Section EC 48(1)(a)(i) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 48(1)(a)(ii) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 48(1)(b)(i) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 48(1)(b)(ii) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 48(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 48(8) amended 2 June 2016 section 15(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EC 48(8) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EC 48 list of defined terms apply inserted 2 June 2016 section 15(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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
2: 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 (4). Valuation method for share acquired by share supplier under share-lending arrangement
3: 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 (4). Amount
4: For subsections (2) and (3), 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. Valuation when disposal of shares acquired under taxable bonus issue
4B: Despite subsection (1), a share that a person acquires under a taxable bonus issue is valued immediately before the person disposes of the share at an amount equal to the amount of the dividend derived by the person from the issue of the share, not including the amount of imputation credits attached to the dividend by the issuer of the share and withholding tax withheld by the issuer of the share. Cost-flow methods
5: 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. Certain emissions units not pooled with other types of emissions unit
5B: No emissions unit described in 1 of the following paragraphs may be pooled for the purposes of subsection (5) with an emissions unit described in another of the paragraphs:
a: pre-1990 forest land emissions units relating to pre-1990 forest land, if the holder of the units would derive income, other than exempt income and excluded income, from a disposal of the land without timber:
b: post-1989 forest land emissions units:
bb: forest sink emissions units:
c: replacement forest land emissions units:
cb: fishing quota emissions units, if the holder of the units would derive income, other than exempt income and excluded income, from a disposal of the individual transferable quota to which the units relate:
d: pre-1990 forest land emissions units relating to pre-1990 forest land, if the holder of the units would derive no income other than exempt income and excluded income from a disposal of the land without timber:
db: fishing quota emissions units, if the holder of the units would derive no income, other than exempt income and excluded income, from a disposal of the individual transferable quota to which the units relate:
e: emissions units issued for no consideration—
i: to which section ED 1B
ii: that have not been assigned a cost under section ED 1B(3)(a) Exceptions: types of emissions units pooled with other types
5C: Despite subsection (5B), for the purposes of subsection (5),—
a: emissions units described in paragraphs (a) to (cb) may be pooled together:
b: emissions units described in paragraphs (d) and (db) may be pooled together. Persons complying with generally accepted accounting practice
6: A person who complies with generally accepted accounting practice must comply with the consistency and disclosure requirements of NZIAS 8 Other persons
7: 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 (5); and
b: may change their cost-flow method if—
i: the change is justified by sound commercial reasons and for this purpose, 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 Valuation of emissions units issued for zero price
7B: Despite subsection (1),—
a: an emissions unit transferred under Part 4, subpart 2 section ED 1B
ab: a forest land emissions unit transferred under section 64 section ED 1B
b: a forest land emissions unit has a value of zero at the end of each income year:
c: a replacement forest land emissions unit has a value of zero at the end of each income year:
cb: a fishing quota emissions unit has a value at the end of each income year of—
i: the market value of the unit at the end of the income year, if the holder of the unit would derive income, other than exempt income and excluded income, from a disposal of the individual transferable quota to which the units relate; or
ii: zero, if subparagraph (i) does not apply:
d: an emissions unit to which section ED 1B Worthless arrangements
8: 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
8B: Use of value
9: 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 49 emissions unit excepted financial arrangement excluded income exempt income fishing quota emissions unit forest land emissions unit forest sink emissions unit generally accepted accounting practice identical share income tax liability income year NZIAS 8 original share pay post-1989 forest land emissions unit pre-1990 forest land pre-1990 forest land emissions unit replacement forest land emissions unit revenue account property share-lending arrangement share-lending right share supplier share user 2004 No 35 s ED 1 Section ED 1(4B) heading inserted 30 March 2017 section 57(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section ED 1(4B) inserted 30 March 2017 section 57(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section ED 1(5B) heading inserted 6 October 2009 section 115(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1(5B) inserted 6 October 2009 section 115(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1(5B)(bb) inserted 7 September 2010 section 28(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section ED 1(5B)(cb) inserted 7 September 2010 section 28(2) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section ED 1(5B)(db) inserted 7 September 2010 section 28(3) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section ED 1(5C) heading inserted 6 October 2009 section 115(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1(5C) substituted 7 September 2010 section 28(4) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section ED 1(6) amended 1 April 2008 section 355(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section ED 1(7B) heading inserted 6 October 2009 section 115(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1(7B) inserted 6 October 2009 section 115(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1(7B)(a) substituted 21 December 2010 section 47(1) Taxation (GST and Remedial Matters) Act 2010 Section ED 1(7B)(a) amended 2 November 2012 section 31 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 1(7B)(ab) inserted 29 March 2025 section 48 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section ED 1(7B)(cb) inserted 21 December 2010 section 47(2) Taxation (GST and Remedial Matters) Act 2010 Section ED 1(8B) heading repealed 6 October 2009 section 115(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1(8B) repealed 6 October 2009 section 115(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1 list of defined terms emissions unit inserted 6 October 2009 section 115(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1 list of defined terms excluded income inserted 6 October 2009 section 115(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1 list of defined terms exempt income inserted 6 October 2009 section 115(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1 list of defined terms fishing quota emissions unit inserted 7 September 2010 section 28(5)(a) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section ED 1 list of defined terms forest land emissions unit inserted 6 October 2009 section 115(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1 list of defined terms forest sink emissions unit inserted 7 September 2010 section 28(5)(b) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section ED 1 list of defined terms NZIAS 8 amended 1 April 2008 section 355(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section ED 1 list of defined terms pay inserted 21 December 2010 section 47(3) Taxation (GST and Remedial Matters) Act 2010 Section ED 1 list of defined terms post-1989 forest land emissions unit inserted 6 October 2009 section 115(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1 list of defined terms pre-1990 forest land inserted 6 October 2009 section 115(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1 list of defined terms pre-1990 forest land emissions unit inserted 6 October 2009 section 115(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1 list of defined terms replacement ETS unit repealed 6 October 2009 section 115(4)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section ED 1 list of defined terms replacement forest land emissions unit inserted 6 October 2009 section 115(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
ED 1B: Valuation of emissions units issued for zero price
What this section applies to
1: This section applies to emissions units held by a person in an income year that—
a: are transferred to the person at a price of zero—
i: under sections 80 to 86F
ii: under section 64 Schedule 4
iii: by a public authority under a supplementary agreement to a negotiated greenhouse agreement:
iv: by a public authority as a rebate, under a negotiated greenhouse agreement, for an indirect emissions charge; and
b: have been held continuously by the person from the time of the transfer; and
c: have not been valued under either of subsections (4)(a) and (8)(a) before the income year; and
d:
e:
f: Value of units transferred to person if no earlier emissions unit shortfall year
2: If an emissions unit is transferred to the person in the income year and there is no earlier income year that is an emissions unit shortfall year for the person under subsections (9) and (10), the emissions unit is assigned a value of zero at the time of the transfer. Value of units transferred to person in income year after emissions unit shortfall year
3: If an earlier income year is an emissions unit shortfall year for the person immediately before an emissions unit (the transferred unit Valuation method at transfer for transferred units
4: If emissions units are transferred to the person in an income year when there is a unit shortfall under subsections (9) and (10) for an earlier emissions unit shortfall year,—
a: for each emissions unit shortfall year in date order, transferred units, up to the number corresponding to the unit shortfall relating to the emissions unit shortfall year, are each assigned a value equal to the market value of an emissions unit at the end of the emissions unit shortfall year:
b: transferred units are each assigned a value equal to zero. Value of units with zero value immediately before end of income year
5: If the value of an emissions unit (the revalued unit Limit on application of subsection (8)(a)
6: The maximum number of units valued under subsection (8)(a) for the income year is the greater of zero and the number calculated using the formula— unit entitlement − disposals at zero value. Definition of items in formula
7: In the formula,—
a: unit entitlement
i: final allocation entitlement under section 83
ii: allocation entitlement under section 85
iii: allocation entitlement under section 64 Schedule 4
iv: emissions units corresponding to the actual emissions amount under a supplementary agreement to a negotiated greenhouse agreement:
v: emissions units corresponding to a rebate, under a negotiated greenhouse agreement, for an indirect emissions charge:
b: disposals at zero value Valuation method at end of income year for revalued units
8: If the person holds revalued units immediately before the end of the income year, the units are each assigned a value—
a: equal to the market value of an emissions unit at the end of the income year:
b: equal to zero. Emissions unit shortfall year
9: If the number of units assigned a market value for an income year under subsection (8)(a) is less than the maximum number given by subsection (6) for the income year, at the end of the income year—
a: the income year is an emissions unit shortfall year unit shortfall unit shortfall value
b: the unit shortfall relating to the emissions unit shortfall year is the difference between the maximum number given by subsection (6) for the income year and the number of zero value units assigned a market value under subsection (8)(a) for the income year:
c: the unit shortfall value relating to the emissions unit shortfall year is the unit shortfall multiplied by the market value of an emissions unit at the end of the income year. Reductions in unit shortfall and unit shortfall value
10: When an emissions unit held by a person is assigned a value under subsection (4)(a) in relation to a year that is an emissions unit shortfall year for the person,—
a: the unit shortfall relating to that year is reduced by the number of emissions units assigned a value in relation to that year:
b: the unit shortfall value relating to that year is reduced by an amount equal to the number of emissions units assigned a value in relation to that year multiplied by the value assigned to each of those emissions units:
c: the year ceases to be an emissions unit shortfall year, if the unit shortfall relating to the year is reduced to zero. Unit shortfall values treated as values of additional emissions units for purposes of adjustments
11: For the purposes of sections CH 1 DB 49 amount emissions unit emissions unit shortfall year fishing quota emissions units forest land emissions units income year public authority replacement forest land emissions units year Section ED 1B substituted 21 December 2010 section 48 Taxation (GST and Remedial Matters) Act 2010 Section ED 1B(1)(a)(i) replaced 2 November 2012 section 32(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 1B(1)(a)(ii) replaced 2 November 2012 section 32(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 1B(1)(a)(iii) inserted 2 November 2012 section 32(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 1B(1)(a)(iv) inserted 2 November 2012 section 32(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 1B(1)(d) repealed 2 November 2012 section 32(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 1B(1)(e) repealed 2 November 2012 section 32(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 1B(1)(f) repealed 2 November 2012 section 32(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 1B(7)(a)(iii) replaced 2 November 2012 section 32(3) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 1B(7)(a)(iv) inserted 2 November 2012 section 32(3) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 1B(7)(a)(v) inserted 2 November 2012 section 32(3) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
ED 2: Transfers of certain excepted financial arrangements within wholly-owned groups
When this section applies
1: This section applies when—
a: a company that is part of a wholly-owned group of companies ( company A company B
b: the transfer of the excepted financial arrangement is not made under a share-lending arrangement; and
c: both companies are resident in New Zealand on the date of the transfer; and
d: 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 part of group
3: If company B stops being part 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 part 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 2004 No 35 s ED 2
ED 2B: Transfers to shareholders by ASX-listed Australian company of shares in subsidiary
When this section applies
1: This section applies when—
a: a company (the splitting company
b: shares in a company (the subsidiary group share transfer
i: shareholders of the splitting company or of a company that is a member of the group:
ii: a member of the group; and
c: the subsidiary is a member of the group immediately before the share transfer; and
d: the share transfer is not a payment of assessable income or exempt income under the Income Tax Assessment Act 1936 (Aust).
2: Cost of shares in splitting company after transfer
3: The cost for a shareholder of the shares in the splitting company that are held by the shareholder after the share transfer is the amount calculated using the formula— cost before transfer × value after transfer ÷ (value acquired shares + value after transfer). Cost of shares in new company
4: The cost for a shareholder of the shares acquired in the share transfer is the amount calculated using the formula— cost before transfer × value acquired shares ÷ (value acquired shares + value after transfer). Definition of items in formulas
5: In the formulas in subsections (3) and (4),—
a: cost before transfer
b: value after transfer
c: value acquired shares Available subscribed capital amounts
6: Immediately after the share transfer, the available subscribed capital,—
a: for each share held in the subsidiary, is—
i: the amount given by section CD 43
ii: zero, if it is impractical to recognise an amount of available subscribed capital for the shares held in the subsidiary:
b: for the shares held in the splitting company, equals the amount of the available subscribed capital for the shares in the splitting company held immediately before the share transfer, reduced by the total amount given by paragraph (a) for the shares held in the subsidiary immediately after the share transfer. Not dividend
7: The transfer of the shares in the subsidiary to the shareholders in the splitting company is not a dividend. Meaning of ASX-listed Australian company
8: ASX-listed Australian company
a: is resident in Australia; and
b: is treated as resident in no tax jurisdiction other than Australia under each agreement that—
i: is between Australia and another tax jurisdiction; and
ii: would be a double tax agreement if negotiated between New Zealand and the other tax jurisdiction; and
c: is included on the official list of ASX Limited, a market licensee under Chapter 7 of the Corporations Act 2001 (Aust); and
d: is not an entity described in schedule 25
e: is required under the Income Tax Assessment Act 1997 (Aust) and Income Tax Assessment Act 1936 (Aust) to maintain a franking account. amount ASX-listed Australian company available subscribed capital company dividend double tax agreement group of companies market value resident in Australia share shareholder Section ED 2B inserted 29 March 2018 section 65(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section ED 2B(1)(b) replaced 18 March 2019 section 163(1) section 163(4) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section ED 2B(1)(c) replaced 18 March 2019 section 163(1) section 163(4) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section ED 2B(2) repealed 18 March 2019 section 163(2) section 163(4) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section ED 2B(8)(c) replaced 29 March 2018 section 65(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section ED 2B list of defined terms group of companies inserted 18 March 2019 section 163(3) section 163(4) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
ED 3: Part-year tax calculations for transfers: general insurance OCR
When this section applies
1: This section applies when a person (the transferor transferee sections CR 4 DW 4 Transfer from non-resident
1B: If sections CR 4 DW 4
a: does the calculations that the transferor would be required to perform under this section if sections CR 4 DW 4
b: uses the results of the calculations in the way required under this section for a transferee. Part-year calculations for transfers
2: A transferor to whom sections CR 4 DW 4 A transferee to whom sections CR 4 and DW 4 apply Part-year calculations for transfers: description
3: For calculating their income tax liability for the tax year that corresponds to the income year, the transferor and transferee treat references, in sections CR 4 DW 4 rules for life insurers part-years Part-year calculations for transfers: effect
4: Transferor's and transferee's part-year calculations may give rise to income and deductions for the income year, but they do not create any part-year tax return obligations. amount deduction general insurance IFRS 4 income income tax liability income year insurer outstanding claims reserve pay tax year Section ED 3 inserted 2 November 2012 section 33(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section ED 3(1) replaced 1 April 2014 section 47(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section ED 3(1B) heading inserted 1 April 2014 section 47(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section ED 3(1B) inserted 1 April 2014 section 47(2) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section ED 3(2) amended 1 April 2014 section 47(3)(a) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section ED 3(2) amended 1 April 2014 section 47(3)(b) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section ED 3(3) amended 30 March 2021 section 34 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
ED 4: Valuation of certain excepted financial arrangements denominated in foreign currency
Who this section applies to
1: This section applies to a person who, in an income year (the current year
a: has an excepted financial arrangement, of a type (the arrangement type section EW 5(21) to (25)
b: has an amount of foreign currency payable or receivable under the excepted financial arrangement (a foreign currency payment Person may choose valuation timing used for financial statements
2: The person may choose to value a foreign currency payment at the close of trading spot exchange rate applicable at the end of the current year, if the person, in preparing financial statements, determines values at the end of the income year for amounts of foreign currency payable or receivable by the person. Consistent valuation timing for excepted financial arrangement
3: If foreign currency payments under a person's excepted financial arrangement are valued under subsection (2) for an income year, the amounts of foreign currency payable or receivable under all of the person's excepted financial arrangements of the arrangement type are valued in the same way for the income year and later income years. amount close of trading spot exchange rate excepted financial arrangement financial arrangement income year Section ED 4 inserted 17 July 2013 section 45(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
EE: Depreciation
Contents
Introductory provision
EE 1: What this subpart does
Quantifying 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
b: quantifies the amount of depreciation recovery income that is income under Part C 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 47 EE 52
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 38(5) EE 48(1) EE 49(2) EE 51(3) EE 52(3) EZ 23B EZ 23BB 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. Allocation of deduction for depreciation loss
5: 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 22
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 23 Partial income-producing use
6: Subpart DE section EE 50 amount deduction depreciable property depreciation loss depreciation recovery income development dispose general permission income income year own property research 2004 No 35 s EE 1 Section EE 1(3)(c) amended 30 March 2017 section 58 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 1(3)(d) amended 27 February 2014 section 48 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section EE 1(3)(d) amended 29 August 2011 section 23 Taxation (Tax Administration and Remedial Matters) Act 2011 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 2004 No 35 s EE 2
EE 3: Ownership of goods subject to reservation of title
When this section applies
1: This section applies when—
a: a person (the 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 Part 3, subparts 1 to 6
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 2004 No 35 s EE 3 Section EE 3(1)(c) amended 1 September 2017 section 347 Contract and Commercial Law Act 2017
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. Ownership of 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 2004 No 35 s EE 4
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 pay term of the lease 2004 No 35 s EE 5 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; or
c: in deriving exempt income, and it is used in performing research and development activities. Subsections (2) to (4) expand on this subsection. 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: utilities distribution assets
2B: For the purposes of this subpart, utilities distribution assets are separate items of property. 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. acquire assessable income business depreciable intangible property depreciable property geothermal energy proving period geothermal well property research and development activity utilities distribution asset 2004 No 35 s EE 6 Section EE 6(1)(b) amended 1 April 2019 section 6(1) section 3 Taxation (Research and Development Tax Credits) Act 2019 Section EE 6(1)(c) inserted 1 April 2019 section 6(1) section 3 Taxation (Research and Development Tax Credits) Act 2019 Section EE 6(2B) heading inserted 31 March 2023 section 50(1) section 50(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EE 6(2B) inserted 31 March 2023 section 50(1) section 50(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EE 6 list of defined terms research and development activities repealed 30 March 2022 section 78 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EE 6 list of defined terms research and development activity inserted 30 March 2022 section 78 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EE 6 list of defined terms utilities distribution asset inserted 31 March 2023 section 50(2) section 50(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
EE 7: What is not depreciable property?
The following property is not depreciable property
a: land other than depreciable intangible property, schedule 13 section EE 6(1)
ab: a lease of land with a perpetual right of renewal:
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:
fb: property that is a piece of an item of depreciable property that is an aircraft or an aircraft engine, if the expenditure on the piece is treated under section DW 5(8)
fc: a utilities distribution network, to the extent to which it is treated as an item of property separate from the relevant utilities distribution assets:
g: property that its owner chooses, under section EE 8
h: property that its owner chooses, under section EE 38
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 aircraft engine aircraft engine overhaul building deduction depreciable intangible property depreciable property dispose excepted financial arrangement financial arrangement land own property trading stock utilities distribution asset utilities distribution network 2004 No 35 s EE 7 Section EE 7(a) amended 17 July 2013 section 46(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EE 7(ab) inserted 1 April 2015 section 65(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EE 7(c) amended 30 June 2014 section 65(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EE 7(e) replaced 17 July 2013 section 46(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EE 7(fb) inserted 1 April 2017 section 59(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 7(fc) inserted 31 March 2023 section 51(1) section 51(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EE 7(j) amended 29 March 2018 section 66 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EE 7 list of defined terms aircraft engine inserted 1 April 2017 section 59(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 7 list of defined terms aircraft engine overhaul inserted 1 April 2017 section 59(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 7 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010 Section EE 7 list of defined terms depreciable intangible property inserted 17 July 2013 section 46(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EE 7 list of defined terms land inserted 17 July 2013 section 46(3) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EE 7 list of defined terms utilities distribution asset inserted 31 March 2023 section 51(2) section 51(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EE 7 list of defined terms utilities distribution network inserted 31 March 2023 section 51(2) section 51(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
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 47 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 2004 No 35 s EE 8 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 26 to EE 36
a: the economic rate, which is dealt with in section EE 26
b: the annual rate, which is dealt with in sections EE 31 EE 33 EE 34
c: a special rate or a provisional rate, both of which are dealt with in sections EE 35 EE 36 Improvements, low value items, and items no longer used
3: Sections EE 37 to EE 39
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 40 to EE 43 Disposals and similar events
5: Sections EE 44 to EE 52 Interpretation provisions
6: Sections EE 54 to EE 67
a: section EE 54
b: sections EE 55 to EE 60 adjusted tax value
c: sections EE 61 to EE 67 Relationship with sections EZ 9 to EZ 28
7: Sections EZ 9 to EZ 28 adjusted tax value amount annual rate associated person depreciable property depreciation loss depreciation method diminishing value method dispose economic rate GST improvement pool method property provisional rate special rate straight-line method 2004 No 35 s EE 9
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 2004 No 35 s EE 10
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 48(2) Exclusion: item partly used for business
5: A person has the amount of depreciation loss calculated under section EE 50(6) Exclusion: recent acquisition of item partly used for business
6: A person has the amount of depreciation loss calculated under section EE 50(9) building adjusted tax value amount business depreciable property depreciation loss dispose income year petroleum-related depreciable property 2004 No 35 s EE 11 Section EE 11 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010 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; and
iii: must not be used for an item of property in the circumstances described in section EZ 9
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 9 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 depreciation method diminishing value method fixed life intangible property income year own pool method poolable property property return of income straight-line method 2004 No 35 s EE 12 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 2004 No 35 s EE 13
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 2004 No 35 s EE 14
EE 15: Amount of adjusted tax value
For the purposes of the comparison of amounts required by section EE 14(1) and (2) adjusted tax value amount deduction depreciation loss income year 2004 No 35 s EE 15
EE 16: Amount resulting from standard calculation
Amount
1: For the purposes of the comparison of amounts required by section EE 14(1) annual rate × value or cost × months ÷ 12. 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: for a patent, design registration, or
ib: for a design registration to which subparagraph (i) does not apply, for a design registration application, or for industrial artistic copyright, its cost to the person, but excluding expenditure that the person incurred before 7 November 2013 or for which they are allowed a deduction under a provision of this Act outside this subpart:
ii: for other items, its cost to the person excluding expenditure for which the person is allowed a deduction under a provision of this Act outside this subpart:
c: for the purposes of paragraph (b), variations to cost sections EE 18 to EE 19 Months: income year of normal length or shorter
5: Months
a: 12; and
b: the number of whole or part calendar months in the income year in which—
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
a: the person owns the item; and
b: the person uses the item or has it available for use for any purpose. Months:
7: For the purposes of subsections (5) and (6), for a patent application and a design registration application months adjusted tax value amount annual rate deduction depreciable property depreciation loss depreciation method design registration design registration application diminishing value method income year industrial artistic copyright own plant variety rights straight-line method 2004 No 35 s EE 16 Section EE 16(4)(b)(i) amended 24 February 2016 section 116(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 16(4)(b)(ib) inserted 24 February 2016 section 116(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 16(4)(c) amended 24 February 2016 section 116(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 16(7) heading amended 24 February 2016 section 116(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 16(7) amended 24 February 2016 section 116(5) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 16 list of defined terms design registration inserted 24 February 2016 section 116(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 16 list of defined terms design registration application inserted 24 February 2016 section 116(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 16 list of defined terms industrial artistic copyright inserted 24 February 2016 section 116(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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) annual rate × value or cost × days ÷ 365. 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 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 depreciation method diminishing value method income year own straight-line method 2004 No 35 s EE 17
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 2004 No 35 s EE 18
EE 18B: Cost: some depreciable intangible property
For the purposes of section EE 16 item of depreciable intangible property or a plant variety rights application amortising item underlying item
a: the underlying item gives rise to, supports, or is an item in which the person holds, the amortising item; and
b: the amount of expenditure is incurred by the person on or after 7 November 2013, if the amortising item is 1 of—
i: a patent or a patent application with a complete specification lodged on or after 1 April 2005:
ii: plant variety rights:
iii: a plant variety rights application:
iv: a design registration:
v: a design registration application:
vi: industrial artistic copyright; and
c: the person is denied a deduction for the expenditure under a provision outside this subpart. deduction depreciable intangible property design registration design registration application industrial artistic copyright plant variety rights Section EE 18B inserted 24 February 2016 section 117(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 18B amended 24 February 2016 section 118(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 18B(b) replaced 24 February 2016 section 118(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 18B list of defined terms design registration inserted 24 February 2016 section 118(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 18B list of defined terms design registration application inserted 24 February 2016 section 118(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 18B list of defined terms industrial artistic copyright inserted 24 February 2016 section 118(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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. When this section does not apply
1B: This section does not apply for additional costs incurred before 7 November 2013 for—
a: a design registration:
b: a design registration application:
c: industrial artistic copyright. 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 design registration design registration application fixed life intangible property income year industrial artistic copyright own 2004 No 35 s EE 19 Section EE 19(1B) heading inserted 24 February 2016 section 119(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 19(1B) inserted 24 February 2016 section 119(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 19 list of defined terms design registration inserted 24 February 2016 section 119(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 19 list of defined terms design registration application inserted 24 February 2016 section 119(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 19 list of defined terms industrial artistic copyright inserted 24 February 2016 section 119(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 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 2004 No 35 s EE 20
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— rate × ((starting adjusted tax value + ending adjusted tax value) ÷ 2) 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 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 2004 No 35 s EE 21 Section EE 21(5) heading substituted 6 October 2009 section 117(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(5) substituted 6 October 2009 section 117(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(6) heading substituted 6 October 2009 section 117(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(6) substituted 6 October 2009 section 117(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(7) heading substituted 6 October 2009 section 117(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(7) substituted 6 October 2009 section 117(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(8) heading repealed 6 October 2009 section 117(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(8) repealed 6 October 2009 section 117(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 section EE 21(5) Insurance or compensation for damage to item
2B: If a person in an income year derives an amount of insurance, indemnity, or compensation (the compensation amount Item disposed of
3: If a person disposes of an item included in a pool, and derives an amount of consideration from the disposal, or derives an amount of insurance, indemnity, or compensation to which subsection (2B) does not apply for damage to the item occurring before the disposal, any excess of the amount derived over the expenditure or loss incurred in deriving the amount 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 10
6: Section EZ 10 acquire adjusted tax value amount depreciation loss depreciation recovery income dispose income income year pool poolable property 2004 No 35 s EE 22 Section EE 22(2B) heading inserted 2 November 2012 section 35(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EE 22(2B) inserted 2 November 2012 section 35(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EE 22(3) amended 2 November 2012 section 35(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
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 2004 No 35 s EE 23
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 the requirements of section EE 66(4)
a: they disposed of it for its market value; and
b: they immediately reacquired it for its market value. acquire dispose pool property 2004 No 35 s EE 24
EE 25: Depreciation loss for plant variety rights application granted in 2005–06 or later income year
When this section applies
1: This section applies when—
a: plant variety rights are granted to a person in their 2005–06 income year or a later income year; and
b: the rights are granted in relation to a plant variety rights application owned by the person; and
c: a deduction for expenditure is denied under another provision. Calculation of deduction
2: For the income year in which the plant variety rights are granted, the person is allowed a deduction for expenditure on the plant variety rights application of an amount calculated using the formula— cost × months of ownership ÷ depreciation months. Definition of items in formula
3: In the formula,—
a: cost section CG 7B
b: months of ownership
c: depreciation months amount deduction income year plant variety rights 2004 No 35 s EE 24B Section EE 25(3)(a) replaced 30 June 2014 section 66(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EE 25 list of defined terms depreciation repealed 24 February 2016 section 243 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Depreciation rates
EE 26: 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 27
i: are not buildings, fixed life intangible property, excluded depreciable property, or property for which an economic rate is set under section EE 29 EE 30
ii: are acquired on or after 1 April 2005:
b: section EE 28
i: are acquired on or after 19 May 2005; and
ii: do not have an economic depreciation rate set under section EZ 23
c: section EE 29
d: section EE 30
i: have an estimated residual market value greater than 13.5% of cost:
ii: would, in the absence of section EE 30 section EE 27 EE 28
e: section EZ 23
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 23 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. Overriding effect of election under section EE 32
3: Subsection (1)(a), (c), and (d) are overridden by section EE 32 building depreciable property economic rate estimated residual market value excluded depreciable property fixed life intangible property 2004 No 35 s EE 25 Section EE 26 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010
EE 27: 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 set under section EE 29 EE 30 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: obtains 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 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
5: The formula is— 2 ÷ estimated useful life. Definition of item in formula
6: In the formula, estimated useful life building Commissioner depreciable property diminishing value rate economic rate estimated useful life excluded depreciable property fixed life intangible property 2004 No 35 s EE 25B Section EE 27 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010
EE 28: 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 30 EZ 23 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 11
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— 1 ÷ estimated useful life. Definition of item in formula
5: In the formula, 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 acquisition section EZ 23 building Commissioner depreciable property diminishing value rate economic rate estimated useful life excluded depreciable property fixed life intangible property 2004 No 35 s EE 25C Section EE 28(6) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 28 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010
EE 29: 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
d: is not used for top-dressing or spraying; and
e: 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 is a diminishing value rate of 30% or a straight-line rate of 21% if the motor vehicle—
a: is not available for hire:
b: is available for hire for a hire period of more than 1 month:
c: is a small passenger service vehicle
d: is a minibus. diminishing value rate economic rate international aircraft minibus small passenger service vehicle straight-line rate 2004 No 35 s EE 25D Section EE 29(3)(c) amended 1 October 2017 section 110(3) Land Transport Amendment Act 2017
EE 30: 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
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: obtains 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— 1 − ((residual value ÷ cost) (1 ÷ estimated useful life) Definition of items in formula
5: In the formula,—
a: residual value
i: estimated residual market value, which is defined in section EE 67
ii: 13.5% of cost:
b: cost
c: estimated useful life section EE 63 building Commissioner depreciable property diminishing value rate economic rate estimated residual market value estimated useful life excluded depreciable property fixed life intangible property 2004 No 35 s EE 25E Section EE 30(1)(b) amended 6 October 2009 section 118 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 30(3)(b) substituted 7 September 2010 section 30(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EE 30 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010
EE 31: 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 FL 2(2) or FL 3(2) sections EE 33 EZ 15 Subsection (2) applies to specify the annual rate for the item if the requirements in subsection (2A) are met, and subsection (3) applies to specify the annual rate for the item if subsections (2A) and (2) do not apply and the requirements in subsection (3A) are met. Requirements for subsection (2) rate
2A: This subsection applies, and the rate is 1 of the rates given by subsection (2), if the person—
a: acquires the item on or before 20 May 2010; or
b: decides to acquire
i: enters into a binding contract for the acquisition
ii: after deciding to acquire its acquisition Rate for item acquired on or before 20 May 2010
2: If subsection (2A) applies, the rate is 1 of the following:
a: the item's economic rate, special rate, or provisional rate, for an item not described in paragraph (b), (c), or (d)
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 car; 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:
d: 0% for a building Requirements for subsection (3) rate
3A: This subsection applies, and the rate is 1 of the rates given by subsection (3), if subsections (2A) and (2) do not apply and the person—
a: acquires the item after 20 May 2010; or
b: decides to acquire
i: enters into a binding contract for the acquisition
ii: incurs expenditure in relation to the item's acquisition Rate for item acquired after 20 May 2010
3: If subsection (3A) applies, the rate is 1 of the following:
a: the item's economic rate, special rate, or provisional rate, for an item not described in paragraph (b) or (c)
b: a diminishing value rate of 15% or a straight-line rate of 10% for an international aircraft:
c: 0%, for a building Administrative requirements
4: For the purposes of subsection (2A)(b), a person must—
a: have available for the Commissioner documents dated on or before 20 May 2010 that evidence that the person had, on or before 20 May 2010, decided to acquire
b: send to the Commissioner a statutory declaration that the person had, on or before 20 May 2010, decided to acquire acquire annual rate building Commissioner depreciable property diminishing value rate economic rate estimated useful life excluded depreciable property fixed life intangible property income year international aircraft New Zealand straight-line rate 2004 No 35 s EE 26 Section EE 31(1) amended 31 March 2023 section 52 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EE 31(1) amended 21 December 2010 section 49(1) Taxation (GST and Remedial Matters) Act 2010 Section EE 31(1) amended 28 May 2010 section 77(1) Taxation (Budget Measures) Act 2010 Section EE 31(2A) heading inserted 21 December 2010 section 49(2) Taxation (GST and Remedial Matters) Act 2010 Section EE 31(2A) inserted 21 December 2010 section 49(2) Taxation (GST and Remedial Matters) Act 2010 Section EE 31(2A)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 31(2A)(b)(i) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 31(2A)(b)(ii) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 31(2) heading substituted 28 May 2010 section 77(2)(a) Taxation (Budget Measures) Act 2010 Section EE 31(2) amended 21 December 2010 section 49(3) Taxation (GST and Remedial Matters) Act 2010 Section EE 31(2) amended 28 May 2010 section 77(2)(b) Taxation (Budget Measures) Act 2010 Section EE 31(2)(a) amended 1 April 2011 section 77(4)(a) Taxation (Budget Measures) Act 2010 Section EE 31(2)(a) substituted 6 October 2009 section 119(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 31(2)(b) amended 6 October 2009 section 119(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 31(2)(c) amended 1 April 2011 section 77(4)(b) Taxation (Budget Measures) Act 2010 Section EE 31(2)(d) added 1 April 2011 section 77(4)(b) Taxation (Budget Measures) Act 2010 Section EE 31(2)(d) amended 1 April 2024 section 55(1) section 55(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 31(3A) heading inserted 21 December 2010 section 49(4) Taxation (GST and Remedial Matters) Act 2010 Section EE 31(3A) inserted 21 December 2010 section 49(4) Taxation (GST and Remedial Matters) Act 2010 Section EE 31(3A)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 31(3A)(b)(i) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 31(3A)(b)(ii) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 31(3) heading added 28 May 2010 section 77(3) Taxation (Budget Measures) Act 2010 Section EE 31(3) amended 21 December 2010 section 49(5) Taxation (GST and Remedial Matters) Act 2010 Section EE 31(3) added 28 May 2010 section 77(3) Taxation (Budget Measures) Act 2010 Section EE 31(3)(a) amended 1 April 2011 section 77(4)(c) Taxation (Budget Measures) Act 2010 Section EE 31(3)(b) amended 1 April 2011 section 77(4)(d) Taxation (Budget Measures) Act 2010 Section EE 31(3)(c) added 1 April 2011 section 77(4)(d) Taxation (Budget Measures) Act 2010 Section EE 31(3)(c) amended 1 April 2024 section 55(2) section 55(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 31(4) heading added 21 December 2010 section 49(6) Taxation (GST and Remedial Matters) Act 2010 Section EE 31(4) added 21 December 2010 section 49(6) Taxation (GST and Remedial Matters) Act 2010 Section EE 31(4)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 31(4)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 31 list of defined terms building inserted 1 April 2024 section 55(3) section 55(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 31 list of defined terms building repealed 1 April 2020 section 5(3)(a) section 5(4) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 31 list of defined terms Commissioner inserted 21 December 2010 section 49(7) Taxation (GST and Remedial Matters) Act 2010 Section EE 31 list of defined terms estimated useful life inserted 1 April 2011 section 77(5) Taxation (Budget Measures) Act 2010 Section EE 31 list of defined terms residential building repealed 1 April 2024 section 55(3) section 55(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
EE 32: Election in relation to certain depreciable property acquired on or after 1 April 2005
When this section applies
1: This section applies when 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 23
2: The person may choose to calculate the depreciation loss for the item of depreciable property for income years corresponding to the 2005–06 tax year and later tax years in accordance with the economic rate section EZ 23 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. building depreciable property depreciation loss economic rate income year return of income tax year 2004 No 35 s EE 26B Section EE 32(2) amended 24 February 2016 section 120(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 32 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010 Section EE 32 list of defined terms economic depreciation rate repealed 24 February 2016 section 120(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 32 list of defined terms economic rate inserted 24 February 2016 section 120(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EE 33: 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 15
ab: a design registration for which a rate is set in section EE 34B
b: a patent for which a rate is set in section EE 34 Rate
2: The rate is the rate calculated using the formula— 1 ÷ legal life. Definition of item in formula
3: In the formula, legal life
a: if section EE 18B EE 19
b: if sections EE 18B 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 design registration excluded depreciable property fixed life intangible property income year legal life 2004 No 35 s EE 27 Section EE 33(1)(ab) inserted 24 February 2016 section 121(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 33(3)(a) replaced 24 February 2016 section 121(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 33(3)(b) amended 24 February 2016 section 121(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 33 list of defined terms design registration inserted 24 February 2016 section 121(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EE 34: 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 when the patent is acquired by a person in their 2005–06 income year or a later income year. Rate
2: The rate is the rate calculated using the formula— 1 ÷ legal life. Definition of item in formula
3: In the formula, legal life Fixed life intangible property
4: If the patent is an item of fixed life intangible property to which section EE 18B EE 19 legal life No depreciation loss for patent application
5: If sections EE 18B EE 19 legal life Depreciation loss for patent application
6: If sections EE 18B EE 19 legal life When section EE 18B or EE 19
7: If sections EE 18B EE 19 do not apply to the patent legal life How rate expressed
8: 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 amount deduction depreciation loss income year legal life 2004 No 35 s EE 27B Section EE 34(4) replaced 24 February 2016 section 122(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 34(5) amended 24 February 2016 section 122(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 34(6) amended 24 February 2016 section 122(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 34(7) heading amended 24 February 2016 section 122(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 34(7) amended 29 March 2018 section 67 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EE 34(7) amended 24 February 2016 section 122(5) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EE 34B: Annual rate for design registrations
When this section applies
1: This section applies to an item that is a design registration (the design Rate
2: The rate is the rate calculated using the formula— 1 ÷ legal life. Definition of item in formula
3: In the formula, legal life When section EE 18B or EE 19 applies to design
4: If the design is an item to which section EE 18B EE 19 legal life When no depreciation loss for design application
5: If sections EE 18B EE 19 design application legal life When depreciation loss for design application
6: If sections EE 18B EE 19 legal life When section EE 18B or EE 19 applied to design application
7: If sections EE 18B EE 19 legal life How rate expressed
8: 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. deduction depreciation loss design registration design registration application income legal life own Section EE 34B inserted 24 February 2016 section 123(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EE 35: 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, special excluded depreciable property, or building
2: A special rate may not be set for an item of excluded depreciable property, an item of special excluded depreciable property, or a building. 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: Section FA 11B(7) building depreciable property excluded depreciable property fixed life intangible property provisional rate special excluded depreciable property special rate 2004 No 35 s EE 28 Section EE 35(2) heading replaced 1 April 2024 section 56(1) section 56(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 35(2) replaced 1 April 2024 section 56(1) section 56(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 35(4) heading inserted 1 April 2008 section 356 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EE 35(4) inserted 1 April 2008 section 356 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EE 35 list of defined terms building inserted 1 April 2024 section 56(2)(b) section 56(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 35 list of defined terms building repealed 1 April 2020 section 6(3)(a) section 6(4) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 35 list of defined terms residential building repealed 1 April 2024 section 56(2)(a) section 56(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 35 list of defined terms special excluded depreciable property inserted 1 April 2024 section 56(2)(b) section 56(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 35 list of defined terms special excluded depreciable property repealed 1 April 2020 section 6(3)(a) section 6(4) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020
EE 36: 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 2004 No 35 s EE 29 Improvements, items of low value, or items no longer used
EE 37: 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) unless the item is a grandparented structure, in which case the person must continue to treat the improvement as a separate item of depreciable property
ab:
b: a person who uses the pool method for the item that was improved must apply subsections (6) and (7). Improvement compulsorily treated as separate item
3B: 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 building depreciable property diminishing value method grandparented structure improvement income year maximum pooling value pool pool method straight-line method 2004 No 35 s EE 30 Section EE 37(3)(a) replaced 1 April 2020 section 7(1) section 7(4) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 37(3)(a) amended 28 March 2024 section 57(1) section 57(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 37(3)(ab) repealed 1 April 2020 section 7(1) section 7(4) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 37(3B) heading repealed 1 April 2020 section 7(2) section 7(4) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 37(3B) repealed 1 April 2020 section 7(2) section 7(4) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 37 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010 Section EE 37 list of defined terms grandparented structure inserted 28 March 2024 section 57(2) section 57(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 37 list of defined terms grandparented structure repealed 1 April 2020 section 7(3) section 7(4) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 37 list of defined terms international aircraft repealed 1 April 2020 section 7(3) section 7(4) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 37 list of defined terms New Zealand repealed 1 April 2020 section 7(3) section 7(4) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020
EE 38: 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, when—
a: the total cost for the item is equal to or less than the threshold value given for the item by subsection (2); 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: 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 (2):
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 (2). Threshold value for item
2: 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 and before 17 March 2020:
c: $5,000, if the item is acquired on or after 17 March 2020 and before 17 March 2021:
d: $1,000, if the item is acquired on or after 17 March 2021. Amount of depreciation loss
3: 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
4: 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 (3). Amount of depreciation recovery income
5: If the person disposes in an income year of an item for which they have been allowed a deduction on a claim under subsection (3), the consideration they derive from the disposal is an amount of depreciation recovery income for the income year. Change of use treated as disposal
6: Subsection (7) applies when—
a: a person has been allowed a deduction on a claim under subsection (3) 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
7: The person is treated as having disposed of the item for its market value at the later time. Increase in specified sum
8: The Governor-General may make an Order in Council increasing the sum specified in subsection (1)(a) and (f). Secondary legislation
9: An Order in Council under subsection (8) is secondary legislation ( see Part 3 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 2004 No 35 s EE 31 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EE 38(2)(b) amended 25 March 2020 section 8(1) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 38(2)(c) inserted 25 March 2020 section 8(2) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 38(2)(d) inserted 25 March 2020 section 8(2) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 38(9) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EE 38(9) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
EE 39: 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 meets the requirements of subsection (2); and
c: has not been depreciated using the pool method. Buildings
2: This section applies to a building that meets the requirements of 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 income year or a later 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
3: The person has an amount of depreciation loss under this section and under no other provision of this subpart. Circumstances
4: 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
5: 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
6: The item’s adjusted tax value at the end of the income year is zero. adjusted tax value amount assessable income associated person building business depreciable property depreciation loss dispose geothermal energy proving period income year pool method 2004 No 35 s EE 32 Section EE 39 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010 Transfers of depreciable property: associated persons and certain amalgamations
EE 40: 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 Deduction for depreciation loss allowed in year of acquisition
2: 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, or would have been allowed the deduction if section EE 11(1) not applied, or if the rate for the item was not 0% in the case of a building with a rate of 0%. Deduction for depreciation loss allowed in year before acquisition
3: The associated person was allowed a deduction for an amount of depreciation loss for the income year before that in which person A acquired it, or would have been allowed a deduction if the rate for the item was not 0% in the case of a building with a rate of 0%. When section DZ 9 applies
4: The associated person has been allowed a deduction for the item under section DZ 9
a: for the income year in which person A acquired it; or
b: for the income year before that in which person A acquired it; or
c: would have been allowed a deduction in either income year if they had incurred a cost for the item for which they were denied any other deduction. If costs incurred for which deduction denied
5: The associated person would have been allowed a deduction for an amount of depreciation loss for the item—
a: for the income year in which person A acquired it, if they had incurred a cost for the item for which they were denied any other deduction and if section EE 11(1)
b: for the income year before that in which person A acquired it, if they had incurred a cost for the item for which they were denied any other deduction. When section EE 8 applies
6: The associated person would have been a person to whom any of subsections (2) to (5) applied, if they had not made an election under section EE 8 Cost of item to person A
7: For the purposes 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 58
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 58
i: the cost of the item to person A:
ii: the cost of the item to the associated person. Exclusions
8: Subsection (7) does not apply if—
a: the item is not depreciable intangible property, and 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: the cost to person A is income of the associated person, other than under section EE 48(1)
c: person A acquires the item on a settlement of relationship property to which section FB 21 Rate
9: The annual rate that person A applies to the item must be 1 of the following:
a: when person A uses the same depreciation method for the item as that used by the associated person for it, the annual rate must be no more than the annual rate that the associated person applied to it:
b: when person A uses a depreciation method for the item that is different from the method the associated person used for it, the annual rate must be no more than a rate equivalent to the rate that the associated person applied to it, as determined by schedule 10 Statutory change: exception
9B: Subsection (9) does not apply when person A may, due to a change of annual rate by a statute, apply an annual rate that is more than the annual rate that the associated person applied. Fixed life intangible property
10: Subsection (9) section EE 33 Relationship with section EE 41 and subpart FC
11: This section—
a: is overridden by section EE 41
b: does not apply to a bequest of property when subpart FC acquire amount annual rate assessable income associated person business Commissioner deduction depreciable intangible property depreciation loss depreciation method fixed life intangible property income income year property settlement of relationship property 2004 No 35 s EE 33 Section EE 40(2) amended 30 March 2022 section 79(1) section 79(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EE 40(3) amended 30 March 2022 section 79(2) section 79(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EE 40(9B) heading inserted 30 March 2021 section 35(1) section 35(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EE 40(9B) inserted 30 March 2021 section 35(1) section 35(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EE 40(10) amended 30 March 2021 section 35(2) section 35(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
EE 41: Transfer of depreciable property on certain amalgamations 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 acquisition of the item is part of an amalgamation that is not a resident’s restricted 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 FO 11(1)(b) FO 15(3) 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 58
i: the value given under section FO 11 FO 15
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 58
i: the value given under section FO 11 FO 16
ii: the cost of the item to the amalgamating company. Exclusions
3: Subsection (2) does not apply if—
a: the item is not depreciable intangible property, and 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:
b: the cost to the amalgamated company is income of the amalgamating company, other than under section EE 48(1) Rate
4: The annual rate that the amalgamated company applies to the item must be 1 of the following:
a: when 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 be no more than the annual rate that the amalgamating company applied to it:
b: when the amalgamated company uses a depreciation method for the item that is different from the method the amalgamating company used for it, the annual rate that the amalgamated company applies to it must be no more than a rate equivalent to the rate that the amalgamating company applied to it, as determined by schedule 10 Fixed life intangible property
5: Subsection (4) does not apply to an item of fixed life intangible property whose rate is set in section EE 33 acquire amalgamated company amalgamating company amalgamation amount annual rate assessable income business Commissioner depreciable intangible property depreciation loss depreciation method fixed life intangible property income income year property resident’s restricted amalgamation 2004 No 35 s EE 34 Section EE 41(2)(b)(i) amended 30 March 2017 section 60 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EE 42: 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 2004 No 35 s EE 35
EE 43: 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 14
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 2004 No 35 s EE 36 Disposals and similar events
EE 44: Application of sections
EE 48 to EE 51 When sections apply
1: Sections EE 48 to EE 51 person has consideration
a: the consideration is consideration of a kind described in section EE 45
b: either—
i: the item is an item of a kind described in section EE 46
ii: the event is an event of a kind described in section EE 47 Exclusions
2: Sections EE 48 to EE 51
a: 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: a person’s patent application has concluded because a patent is granted to the person in relation to the application:
bb: a person’s design registration application has concluded because a design registration is granted to the person in relation to the application:
c: a person’s geothermal well becomes unavailable for use under section EE 6(4) ended:
d: a person receives, for an item of property, an amount of insurance or compensation section EZ 23B arrangement consideration design registration design registration application dispose geothermal energy proving period geothermal well property 2004 No 35 s EE 37 Section EE 44 heading amended 30 March 2017 section 61(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 44(1) amended 30 March 2017 section 61(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 44(1) amended 21 December 2010 section 51 Taxation (GST and Remedial Matters) Act 2010 Section EE 44(2) amended 29 March 2018 section 68 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EE 44(2)(bb) inserted 24 February 2016 section 124(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 44(2)(c) amended 29 August 2011 section 24 Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 44(2)(d) added 29 August 2011 section 24 Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 44(2)(d) amended 30 March 2022 section 80 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EE 44 list of defined terms design registration inserted 24 February 2016 section 124(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 44 list of defined terms design registration application inserted 24 February 2016 section 124(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EE 45: Consideration for purposes of section EE 44
General rule
1: For the purposes of section EE 44 consideration disposal cost
a: is not allowed as a deduction to the person other than as a deduction for an amount of depreciation loss; and
b: is not counted in the amount that a person derives GST for disposal costs
1B: All amounts deducted or deductible by the person under section 20(3) Consideration may be zero or negative
2: For the purposes of section EE 44 consideration Other than market value
3: If the person has consideration that is not the item's market value, the amount that the person derives
a: if the person makes a taxable supply, market value
b: this subsection does not apply to a transfer under a relationship agreement; and
c: this subsection does not apply in a case described in any of subsections (5) to (10). Relationship with subpart FC
4: Subsection (3) does not apply to a disposal of property to which any of sections FC 3 FC 4 Change of use or location of use
5: The consideration that a person derives from the event described in section EE 47(2)
a: if the person is a registered person, “market value” means the market value excluding the amount of GST that would have been charged if the market value is treated as being consideration received for a taxable supply by the person:
b: this subsection does not apply to a transfer under a relationship agreement. Loss or theft
6: The amount that a person derives section EE 47(3) amount A section 5(13) Unused geothermal well brought into use
7: The amount that a person derives section EE 47(6) section EE 39(4) Irreparable damage or damage rendering building useless
8: The amount that a person derives section EE 47(4) total of the amount of insurance, indemnity, or compensation, and the amount of proceeds from the disposal, affected item amount A section 5(13) Repossession
9: The amount that a person derives section EE 47(5)
a: if the person is a registered person, the amount that a person derives
b: net amount paid Other items
10: The amount that a person derives
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
11: The amount that a person derives section EE 47(10) section EZ 21(1) Sections EE 45 EE 47 Item fitted to aircraft or aircraft engine in aircraft engine overhaul
12: The amount that the person derives from the event referred to in section EE 47(11) adjusted tax value aircraft engine aircraft engine overhaul amount consideration deduction depreciation loss dispose geothermal well GST GST charged New Zealand registered person relationship agreement services taxable supply 2004 No 35 s EE 38 Section EE 45(1) heading substituted 21 December 2010 section 52(1) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(1) substituted 21 December 2010 section 52(1) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(1B) heading inserted 21 December 2010 section 52(1) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(1B) inserted 21 December 2010 section 52(1) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(2) heading substituted 21 December 2010 section 52(1) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(2) substituted 21 December 2010 section 52(1) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(3) amended 21 December 2010 section 52(2) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(5)(a) replaced 18 March 2019 section 164 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EE 45(6) amended 21 December 2010 section 52(3) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(7) amended 21 December 2010 section 52(4) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(8) heading substituted 29 August 2011 section 25(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 45(8) amended 2 November 2012 section 36(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EE 45(8) amended 29 August 2011 section 25(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 45(8) amended 21 December 2010 section 52(5) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(9) amended 21 December 2010 section 52(6)(a) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(9)(a) amended 21 December 2010 section 52(6)(b) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(10) amended 21 December 2010 section 52(7) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(11) amended 21 December 2010 section 52(8) Taxation (GST and Remedial Matters) Act 2010 Section EE 45(12) heading inserted 1 April 2017 section 62(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 45(12) inserted 1 April 2017 section 62(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 45 list of defined terms adjusted tax value inserted 1 April 2017 section 62(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 45 list of defined terms aircraft engine inserted 1 April 2017 section 62(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 45 list of defined terms aircraft engine overhaul inserted 1 April 2017 section 62(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EE 46: Items for purposes of section EE 44
Items to which sections EE 48 to EE 52 apply
1: For the purposes of section EE 44 sections EE 48 to EE 52
a: an item for which the person has been allowed a deduction for an amount of depreciation loss they have had under section EE 33
b: an item to which section CZ 11 Exclusions
2: Sections EE 48 to EE 52
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 2004 No 35 s EE 39
EE 47: Events for purposes of section EE 44
Events to which sections EE 48 to EE 51
1: For the purposes of section EE 44 sections EE 48 to EE 51 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, and includes a change in use of an item for the purposes of the definition of commercial fit-out Event timing for person’s income becoming tax exempt
2B: Despite subsection (2), if the event is connected to a person’s income becoming exempt income, the event is treated as occurring immediately before the person’s income becomes exempt. 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 or damage rendering building
4: The third event is—
a: the irreparable damage of an item of property that is not a building
b: the damage of an item of property that is a building
i: useless for the purpose of deriving income; and
ii: demolished or abandoned for later demolition. 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
6: The fifth event is, for a person’s geothermal well that is unavailable for use under section EE 6(4)
a: use the well in deriving assessable income or carrying on a business for the purpose of deriving assessable income:
b: have the well available for use in deriving assessable income or carrying on a business for the purpose of deriving assessable income. Statutory acquisition
7: The sixth event is the acquisition of an item of property by a person acting under statutory authority. 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 21(2) Sections EE 45 EE 47 Item fitted to aircraft or aircraft engine in aircraft engine overhaul
11: The tenth event is the fitting of an item of property to an aircraft or aircraft engine as a replacement piece as part of an aircraft engine overhaul to which section DW 5 aircraft engine aircraft engine overhaul amount assessable income business deduction depreciation loss geothermal energy proving period geothermal well improvement income year lessee New Zealand own pay property 2004 No 35 s EE 40 Section EE 47(1) heading amended 30 March 2017 section 63(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 47(1) amended 30 March 2017 section 63(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 47(2) amended 1 April 2011 section 53(1) Taxation (GST and Remedial Matters) Act 2010 Section EE 47(2B) heading replaced 23 March 2020 section 105 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EE 47(2B) inserted 18 March 2019 section 165 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EE 47(4) heading substituted 29 August 2011 section 26 Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 47(4) heading amended 30 March 2022 section 81(1) section 81(4) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EE 47(4) substituted 29 August 2011 section 26 Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 47(4)(a) amended 30 March 2022 section 81(2) section 81(4) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EE 47(4)(b) amended 30 March 2022 section 81(3) section 81(4) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EE 47(11) heading inserted 1 April 2017 section 63(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 47(11) inserted 1 April 2017 section 63(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 47 list of defined terms aircraft engine inserted 1 April 2017 section 63(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 47 list of defined terms aircraft engine overhaul inserted 1 April 2017 section 63(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EE 48: Effect of disposal or event
Amount of depreciation recovery income
1: For the purposes of section EE 44
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 amount given by subsections (1B) and (1C). Amount for subsection (1)(b)
1B: The amount for the purposes of subsection (1)(b) is given by the following formula: item depreciation loss + CZ 11 item amount + DB 64 item amount. Definition of items in formula
1C: In the formula in subsection (1B),—
a: item depreciation loss
i: depreciation loss for which the person has been allowed deductions for the item; and
ii: if the item is a building, the total amount of deductions allowed under sections DB 65 section 4 DB 65B
b: CZ 11 item amount section CZ 11
c: DB 64 item amount section DB 64 Amount of depreciation loss
2: For the purposes of section EE 44 Income year of depreciation recovery income
2B: The person derives the depreciation recovery income in the income year that is the earliest income year in which the consideration can be reasonably estimated. When subsection (2) does not apply
3: Subsection (2) does not apply if the item is a building unless—
a: the building
b:
c: the damage is caused—
i: by a natural event not under the control of the person, an agent of the person, or an associated person; 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. acquire adjusted tax value amount building capital contribution consideration deduction depreciation loss depreciation recovery income dispose income income year 2004 No 35 s EE 41 Section EE 48(1) amended 29 August 2011 section 27(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 48(1)(b) substituted 28 May 2010 section 80(1) Taxation (Budget Measures) Act 2010 Section EE 48(1B) heading inserted 28 May 2010 section 80(2) Taxation (Budget Measures) Act 2010 Section EE 48(1B) inserted 28 May 2010 section 80(2) Taxation (Budget Measures) Act 2010 Section EE 48(1C) heading inserted 28 May 2010 section 80(2) Taxation (Budget Measures) Act 2010 Section EE 48(1C) inserted 28 May 2010 section 80(2) Taxation (Budget Measures) Act 2010 Section EE 48(1C)(a) replaced 1 April 2024 section 58(1) section 58(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 48(2) amended 29 August 2011 section 27(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 48(2B) heading inserted 29 August 2011 section 27(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 48(2B) inserted 29 August 2011 section 27(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 48(3) heading substituted 29 August 2011 section 27(4) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 48(3)(a) substituted 29 August 2011 section 27(5) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 48(3)(a) amended 30 March 2022 section 82(1) section 82(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EE 48(3)(b) repealed 29 August 2011 section 27(6) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 48(3)(c) substituted 29 August 2011 section 27(7) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 48 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010 Section EE 48 list of defined terms capital contribution inserted 28 May 2010 section 80(3) Taxation (Budget Measures) Act 2010
EE 49: 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 46
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 11
iii: section EE 50 Depreciation recovery income
2: If the consideration referred to in section EE 44 No depreciation recovery income
2B: Despite subsections (1) and (2), there is no depreciation recovery income under this section for a motor vehicle which is dealt with under subpart DE section DE 2B(1) section DE 12 Formula
3: The formula is— (all deductions ÷ (base value − adjusted tax value)) 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 57 to EE 59 Adjusted tax value
7: Adjusted tax value Amount of depreciation recovery income
8: Amount of depreciation recovery income section EE 48(1)(a) adjusted tax value amount business deduction depreciation loss depreciation recovery income income year own property 2004 No 35 s EE 42 Section EE 49(2B) heading inserted 1 April 2017 section 80(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section EE 49(2B) inserted 1 April 2017 section 80(1) Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 Section EE 49(8) amended 30 March 2017 section 64(1) section 64(2) and (3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EE 50: Amount of depreciation loss when item partly used to produce income
When subsection (2) applies
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 48(2)
b: at a time during the income year, the item is partly used, or 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 Partial use: formula
2: The deduction the person is allowed for the amount of depreciation loss must not be more than the amount calculated using the formula— depreciation loss × qualifying use days ÷ all days. Definition of items in formula
3: In the formula in subsection (2),—
a: depreciation loss
b: qualifying use days
c: all days Other units of measurement
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. When subsection (6) applies
5: Subsection (6) applies when—
a: a person has an amount of depreciation loss for an item of depreciable property arising under section EE 48(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 11
c: the item is not a motor vehicle to which subpart DE Deduction for depreciation loss: formula
6: The deduction the person is allowed for the amount of depreciation loss is calculated using the formula— disposal depreciation loss × all deductions Definition of items in formula
7: In the formula in subsection (6),—
a: disposal depreciation loss section EE 48(2)
b: all deductions
c: base value sections EE 57 to EE 59
d: adjusted tax value at date When subsection (9) applies
8: Subsection (9) applies when—
a: a person has an amount of depreciation loss for an item of depreciable property for an income year arising under section EE 48(2)
b: in the income year in which the amount of depreciation loss arises, the person starts to use the item, or 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 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 Partial use: formula
9: The deduction the person is allowed for the amount of depreciation loss is calculated using the formula— disposal depreciation loss × qualifying use days ÷ all days. Definition of items in formula
10: In the formula in subsection (9),—
a: disposal depreciation loss section EE 48(2)
b: qualifying use days
c: all days Other units of measurement
11: 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. adjusted tax value amount assessable income business deduction depreciable property depreciation loss fringe benefit tax income year motor vehicle property 2004 No 35 s FB 7
EE 51: 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 47(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 48(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 2004 No 35 s EE 43
EE 52: 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 46 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. Compensation derived when item no longer owned
4: If, in the absence of this subsection, the person would derive the amount of insurance, indemnity, or compensation after ceasing to own the item, the person is treated as deriving the amount immediately before the person ceases to own the item. adjusted tax value amount depreciation recovery income income year property 2004 No 35 s EE 44 Section EE 52(4) heading inserted 27 February 2014 section 49 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section EE 52(4) inserted 27 February 2014 section 49 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
EE 53: 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 47(6) Person treated as acquiring well
2: The person is treated as having acquired the geothermal well on the day on which the event occurs for the cost of the well under this subpart before the event occurs. acquire geothermal well 2004 No 35 s EE 44B Interpretation provisions
EE 54: 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 subsections (3) and (4) Deductions from output tax
3: The item's cost is reduced by the amount of any adjustment taken into account in the income year under section 20(3)(e) Adjustments for output tax
4: The item's cost is increased by adding an amount of deductible output tax that the person has for the income year. amount deductible output tax depreciable property depreciation loss depreciation recovery income GST income year input tax output tax 2004 No 35 s EE 45 Section EE 54(2) amended 1 April 2011 section 54(1) Taxation (GST and Remedial Matters) Act 2010 Section EE 54(3) heading substituted 1 April 2011 section 54(2) Taxation (GST and Remedial Matters) Act 2010 Section EE 54(3) substituted 1 April 2011 section 54(2) Taxation (GST and Remedial Matters) Act 2010 Section EE 54(4) heading substituted 1 April 2011 section 54(2) Taxation (GST and Remedial Matters) Act 2010 Section EE 54(4) substituted 1 April 2011 section 54(2) Taxation (GST and Remedial Matters) Act 2010 Section EE 54 list of defined terms deductible output tax inserted 1 April 2011 section 54(3) Taxation (GST and Remedial Matters) Act 2010 Section EE 54 list of defined terms taxable supply repealed 1 April 2011 section 54(3) Taxation (GST and Remedial Matters) Act 2010 Adjusted tax value
EE 55: Meaning of adjusted tax value
Meaning
1: Adjusted tax value
a: for an item of depreciable property, the amount calculated using the formula in section EE 56
b: for a pool, the total adjusted tax value determined under section EE 21 Exception
2: Section FA 11B(6) adjusted tax value amount depreciable property pool 2004 No 35 s EE 46 Section EE 55(1) heading inserted 29 August 2011 section 140(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EE 55(1)(b) substituted 6 October 2009 section 120(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 55(2) heading inserted 1 April 2008 section 357 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EE 55(2) inserted 1 April 2008 section 357 Taxation (Business Taxation and Remedial Matters) Act 2007
EE 56: Formula
Formula
1: The formula referred to in section EE 55 base value − total deductions. Definition of items in formula
2: In the formula,—
a: base value sections EE 57 EE 58 EE 59 EZ 22(1) section EE 56
b: total deductions section EE 60 deduction 2004 No 35 s EE 47
EE 57: Base value in section EE 56 when none of sections EE 58, EE 59, and EZ 22(1) applies
When this section applies
1: This section applies when none of sections EE 58 EE 59 EZ 22(1) section EE 56 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 38(3) EE 48(2) Income Tax Act 2004
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 2004 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 2004
cb: expenditure is included in it if the item is a patent application, a patent, a design registration, a design registration application Resource Management Act 1991 section CG 7B
d: expenditure—
i: is not excluded from it if it is described in section EZ 22(2)(a)
ii: is excluded from it if it is described in section EZ 22(2)(b) or EZ 23BA(2) amount deduction depreciation loss design registration design registration application 2004 No 35 s EE 48 Section EE 57(3)(cb) inserted 30 June 2014 section 67(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EE 57(3)(cb) amended 23 December 2023 section 6 Resource Management (Natural and Built Environment and Spatial Planning Repeal and Interim Fast-track Consenting) Act 2023 Section EE 57(3)(cb) amended 24 February 2016 section 125(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 57(3)(d)(ii) amended 1 April 2017 section 65 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 57 list of defined terms design registration inserted 24 February 2016 section 125(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 57 list of defined terms design registration application inserted 24 February 2016 section 125(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EE 58: Base value in section EE 56 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 22(3) section EE 56 Base value
2: Base value , reduced for an item that is an aircraft engine or aircraft by an amount referred to in section EZ 23BA(2) acquire aircraft engine amount assessable income building business deduction depreciation loss income year petroleum-related depreciable property 2004 No 35 s EE 49 Section EE 58(2) amended 1 April 2017 section 66(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 58 list of defined terms aircraft engine inserted 1 April 2017 section 66(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 58 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010
EE 59: Base value in section EE 56 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 22(1) section EE 56
b: the person ( person A 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 38(3) EE 48(2) Income Tax Act 2004
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 2004
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 2004
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 2004 acquire amount associated person deduction depreciation loss own petroleum-related depreciable property 2004 No 35 s EE 50
EE 60: Total deductions in section EE 56
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 25 ; and
d: the total amount of deductions allowed under sections DB 65 section 4 DB 65B 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 52(2)
b: section EE 44(2)
c: section EG 19(5) of the Income Tax Act 1994:
d: the provision described in section EZ 22(4) section EE 56 1995); and
e: section EZ 23BA(4) 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,—
i: if the item is a patent, for the patent application in relation to which the item was granted:
ib: if the item is a design registration, for the design registration application in relation to which the item was granted:
ii: if the item is a geothermal well that a person acquired under section EE 53(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 39 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 57
i: unless subparagraph (ii), (iii), or (iv)
ii: if the item is a geothermal well that a person acquired under section EE 53(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
iv: if the item is a design registration and the person acquired the design registration application in relation to which the design registration was granted, the date on which the person acquired the design registration application; or
b: for an item to which section EE 58
i: unless subparagraph (ii) or (iii)
ii: if the item is a patent and the person acquired the patent application in relation to which the patent was granted, the beginning of the month in which the person acquired the patent application; or
iii: if the item is a design registration and the person acquired the design registration application in relation to which the design registration was granted, the beginning of the month in which the person acquired the design registration application; or
c: for an item to which section EE 59
d: for an item to which section EZ 22(1) acquire adjusted tax value amount assessable income associated person business deduction depreciation loss depreciation method design registration design registration application diminishing value method geothermal well income year 2004 No 35 s EE 51 Section EE 60(1)(d) inserted 1 April 2020 section 9 COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 60(1)(d) amended 1 April 2024 section 59(1) section 59(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 60(2)(d) amended 1 April 2017 section 67(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 60(2)(e) inserted 1 April 2017 section 67(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EE 60(2)(e) amended 29 March 2018 section 69(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EE 60(3)(a)(ib) inserted 24 February 2016 section 126(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 60(3B) heading replaced 17 July 2013 section 47(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EE 60(3B) inserted 7 September 2010 section 31(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EE 60(3B) amended 17 July 2013 section 47(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EE 60(5)(a)(i) amended 24 February 2016 section 126(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 60(5)(a)(ii) amended 2 November 2012 section 37 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EE 60(5)(a)(iv) inserted 24 February 2016 section 126(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 60(5)(b)(i) amended 24 February 2016 section 126(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 60(5)(b)(iii) inserted 24 February 2016 section 126(5) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 60 list of defined terms design registration inserted 24 February 2016 section 126(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 60 list of defined terms design registration application inserted 24 February 2016 section 126(6) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Definitions
EE 61: Meaning of annual rate
Meaning
1: Annual rate subsections (2) to (5B) 1995–96 income year or later
2: The rate is the rate set by section EE 31(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 (5). 1995–96 income year or later: international aircraft
3: The rate is the rate set by section EE 31(2)(c) 1995–1996 income year or later: buildings
3B: The rate is the rate set by section EE 31(2)(d) building
a: has an economic rate or provisional rate of more than 0% due to an estimated useful life of 50 years or more; and
b: the person acquires in their 1995–96 income year or a later income year. Fixed life intangible property
4: The rate is the rate set by section EE 33
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
5: The rate is the rate set by section EE 34 Design registrations, applications
5B: The rate is the rate set by section EE 34B 1994–95 income year
6: The rate is the rate set by section EZ 13
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
7: The rate is the rate set by section EZ 15 Special excluded depreciable property
7B: The rate is 0% for all depreciation methods if the item is an item of special excluded depreciable property that would be an item of excluded depreciable property but for the exclusion in section EE 64(3) Exception
8: Section FA 11B(7) acquire annual rate building depreciable property design registration economic rate estimated useful life excluded depreciable property fixed life intangible property income year international aircraft own provisional rate special excluded depreciable property 2004 No 35 s EE 52 Section EE 61(1) amended 24 February 2016 section 127(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 61(2) amended 28 May 2010 section 81(1) Taxation (Budget Measures) Act 2010 Section EE 61(3) amended 28 May 2010 section 81(2) Taxation (Budget Measures) Act 2010 Section EE 61(3B) heading inserted 1 April 2011 section 81(3) Taxation (Budget Measures) Act 2010 Section EE 61(3B) heading amended 1 April 2024 section 60(1) section 60(5) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 61(3B) inserted 1 April 2011 section 81(3) Taxation (Budget Measures) Act 2010 Section EE 61(3B) amended 1 April 2024 section 60(2) section 60(5) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 61(5B) heading inserted 24 February 2016 section 127(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 61(5B) inserted 24 February 2016 section 127(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 61(7B) heading replaced 1 April 2024 section 60(3) section 60(5) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 61(7B) replaced 1 April 2024 section 60(3) section 60(5) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 61(8) heading inserted 1 April 2008 section 358 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EE 61(8) inserted 1 April 2008 section 358 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EE 61 list of defined terms building inserted 1 April 2024 section 60(4)(b) section 60(5) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 61 list of defined terms building repealed 1 April 2020 section 10(4)(a) section 10(5) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 61 list of defined terms design registration inserted 24 February 2016 section 127(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 61 list of defined terms economic rate inserted 1 April 2011 section 81(5) Taxation (Budget Measures) Act 2010 Section EE 61 list of defined terms estimated useful life inserted 1 April 2011 section 81(5) Taxation (Budget Measures) Act 2010 Section EE 61 list of defined terms provisional rate inserted 1 April 2011 section 81(5) Taxation (Budget Measures) Act 2010 Section EE 61 list of defined terms residential building repealed 1 April 2024 section 60(4)(a) section 60(5) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 61 list of defined terms special excluded depreciable property inserted 1 April 2024 section 60(4)(b) section 60(5) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 61 list of defined terms special excluded depreciable property repealed 1 April 2020 section 10(4)(a) section 10(5) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020
EE 62: Meaning of depreciable intangible property
Meaning
1: Depreciable intangible property schedule 14 Criteria for listing in schedule 14
2: For property to be listed in schedule 14
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 14 prevails
3: Property that is listed in schedule 14 acquire depreciable intangible property property 2004 No 35 s EE 53
EE 63: Meaning of estimated useful life
Meaning for item of depreciable property, except for 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 2004 No 35 s EE 54
EE 64: Meaning of excluded depreciable property
Meaning
1: Excluded depreciable property
a: depreciable property for whose acquisition
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. Another exclusion
3: Excluded depreciable property Another exclusion
3: Commissioner depreciable property excluded depreciable property income year New Zealand property qualifying improvement qualifying asset special excluded depreciable property trading stock 2004 No 35 s EE 55 Section EE 64(1)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 64(3) heading inserted 1 April 2024 section 61(1) section 61(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 64(3) inserted 1 April 2024 section 61(1) section 61(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 64(3) heading repealed 1 April 2020 section 11(1) section 11(3) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 64(3) repealed 1 April 2020 section 11(1) section 11(3) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 64 list of defined terms special excluded depreciable property inserted 1 April 2024 section 61(2) section 61(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 64 list of defined terms special excluded depreciable property repealed 1 April 2020 section 11(2) section 11(3) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020
EE 65: Meaning of maximum pooling value
Meaning
1: Maximum pooling value
a: $5,000
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). Secondary legislation
3: An Order in Council under subsection (2) is secondary legislation ( see Part 3 depreciable property maximum pooling value 2004 No 35 s EE 56 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EE 65(1)(a) 1 July 2015 clause 3(1) Income Tax (Maximum Pooling Value) Order 2015 Section EE 65(3) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EE 65(3) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
EE 66: 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 building business Commissioner depreciable property fringe benefit tax income year maximum pooling value own poolable property 2004 No 35 s EE 57 Section EE 66 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010
EE 67: Other definitions
In this Act,— depreciation method section EE 12 diminishing value method diminishing value rate economic rate sections EE 27 to EE 30 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) to (d)
b: for an item that is a patent application, a design registration application, a patent, or a design registration, means the legal life under paragraph (a) that a patent or design registration would have if granted when the relevant application is first lodged:
bb: for an item that is industrial artistic copyright, means the number of years, months, and days for which protection against copyright infringement is available as a result of section 75(1)(c) to (e)
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:
d: for a person and a right (a land right
i: when the person acquires the owner's interest; and
ii: assuming that the person or associated person exercises rights of renewal, extension, or further grant that are either essentially unconditional or conditional on the payment of predetermined fees 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 35 special excluded depreciable property schedule 39 special excluded depreciable property special rate section EE 35 straight-line method straight-line rate acquire adjusted tax value amount building depreciable intangible property depreciable property depreciation loss depreciation method design registration design registration application diminishing value method diminishing value rate economic rate estimated residual market value estimated useful life fixed life intangible property improvement income year industrial artistic copyright international aircraft legal life New Zealand own pay petroleum petroleum-related depreciable property plant variety rights pool pool method property provisional rate special excluded depreciable property special rate straight-line method straight-line rate 2004 No 35 s EE 58 Section EE 67 legal life amended 1 April 2015 section 68(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EE 67 legal life replaced 24 February 2016 section 128(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 67 legal life inserted 24 February 2016 section 128(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 67 legal life amended 1 April 2015 section 68(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EE 67 legal life inserted 1 April 2015 section 68(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EE 67 special excluded depreciable property inserted 1 April 2024 section 62(1) section 62(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EE 67 special excluded depreciable property repealed 1 April 2020 section 12(1) section 12(2) COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 Section EE 67 list of defined terms building inserted 28 May 2010 section 84 Taxation (Budget Measures) Act 2010 Section EE 67 list of defined terms design registration inserted 24 February 2016 section 128(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 67 list of defined terms design registration application inserted 24 February 2016 section 128(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 67 list of defined terms industrial artistic copyright inserted 24 February 2016 section 128(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EE 67 list of defined terms special excluded depreciable property inserted 1 April 2011 section 83(2) Taxation (Budget Measures) Act 2010
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 pay 2004 No 35 s EF 1
EF 2: Employer’s superannuation contribution tax
An amount of employer’s superannuation contribution tax (ESCT) for which a deduction is allowed may be deducted only in the income year in which the employer’s superannuation cash contributions deduction employer's superannuation cash contribution ESCT income year pay 2004 No 35 s EF 2 Section EF 2 amended 6 October 2009 section 121(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EF 2 list of defined terms employer's superannuation cash contribution inserted 6 October 2009 section 121(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EF 2 list of defined terms employer's superannuation contribution repealed 6 October 2009 section 121(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EF 3: Accident compensation levies and premiums
Timing of deduction
1: A deduction that an employer or self-employed person is allowed for an Accident Compensation Corporation (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 3, part A schedule 3, part A References to dates in schedule 3
4: For the purposes of subsection (3), references to the date in schedule 3, part A
a: the definition of instalment date section YA 1
b: sections RA 3 RC 1(2) RC 20 to RC 24 Meaning of ACC levy or premium
5: In this section, ACC levy or premium
a: the following levy or premium:
i: a levy to fund the Work Account under section 168 Accident Compensation Act 2001
ii: an employer’s premium to fund the Employers’ Account under section 281B of the Accident Insurance Act 1998:
b:
c: the following levy or premium:
i: a levy to fund the Work Account under section 168B 211 Accident 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) Accident Compensation Act 2001
ii: a premium to fund the Earners’ Account under section 283(1) of the Accident Insurance Act 1998:
e: 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 pay time bar 2004 No 35 s EF 3 Section EF 3(5)(a)(i) amended 21 December 2010 section 189 Taxation (GST and Remedial Matters) Act 2010 Section EF 3(5)(b) repealed 3 March 2010 section 49 Accident Compensation Amendment Act 2010 Section EF 3(5)(c)(i) amended 21 December 2010 section 189 Taxation (GST and Remedial Matters) Act 2010 Section EF 3(5)(d)(i) amended 21 December 2010 section 189 Taxation (GST and Remedial Matters) Act 2010 Section EF 3(5)(e) substituted 3 March 2010 section 49 Accident Compensation Amendment Act 2010
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: Effect of amended assessment
3: Amended assessment in same year
4: Commissioner income income year interest pay 2004 No 35 s EF 4 Section EF 4(1) amended 29 August 2011 section 28(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 4(2) heading repealed 29 August 2011 section 28(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 4(2) repealed 29 August 2011 section 28(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 4(3) heading repealed 29 August 2011 section 28(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 4(3) repealed 29 August 2011 section 28(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 4(4) heading repealed 29 August 2011 section 28(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 4(4) repealed 29 August 2011 section 28(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 4 list of defined terms assessment repealed 29 August 2011 section 28(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 4 list of defined terms notice repealed 29 August 2011 section 28(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 4 list of defined terms tax year repealed 29 August 2011 section 28(3) Taxation (Tax Administration and Remedial Matters) Act 2011
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: Effect of amended assessment
3: Terminal amended assessment
4: Amended assessment in same year
5: Commissioner deduction income year pay 2004 No 35 s EF 5 Section EF 5(1) substituted 29 August 2011 section 29(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5(2) heading repealed 29 August 2011 section 29(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5(2) amended 2 November 2012 section 38 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EF 5(2) repealed 29 August 2011 Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5(3) heading repealed 29 August 2011 section 29(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5(3) repealed 29 August 2011 section 29(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5(4) heading repealed 29 August 2011 section 29(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5(4) repealed 29 August 2011 section 29(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5(5) heading repealed 29 August 2011 section 29(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5(5) repealed 29 August 2011 section 29(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5 list of defined terms assessment repealed 29 August 2011 section 29(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5 list of defined terms Commissioner substituted 29 August 2011 section 29(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5 list of defined terms deduction substituted 29 August 2011 section 29(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5 list of defined terms income tax liability repealed 29 August 2011 section 29(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5 list of defined terms income year substituted 29 August 2011 section 29(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5 list of defined terms interest repealed 29 August 2011 section 29(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5 list of defined terms liquidation repealed 29 August 2011 section 29(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5 list of defined terms notice repealed 29 August 2011 section 29(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5 list of defined terms pay substituted 29 August 2011 section 29(3) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EF 5 list of defined terms tax year repealed 29 August 2011 section 29(3) Taxation (Tax Administration and Remedial Matters) Act 2011
EF 6: Different tax years
Section EF 6 repealed 29 August 2011 section 30(1) Taxation (Tax Administration and Remedial Matters) Act 2011
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 notifies the person that the election can apply
b: dividends, unless the Commissioner notifies the person that the election can apply
c: attributed controlled foreign company (CFC) income; or
d: foreign investment fund (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 person seeks the Commissioner’s agreement to revoke the election, and the Commissioner notifies them that they may 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 that does not have a source in New Zealand annual income tax balance date assessable income attributed CFC income attributing interest Commissioner company deduction dividend exempt income FIF income financial arrangements rules foreign expenditure foreign source income income income tax income year net income notify pay resident in New Zealand return of income source in New Zealand tax year 2004 No 35 s EG 1 Section EG 1(4)(a) amended 2 June 2016 section 16(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EG 1(4)(b) amended 2 June 2016 section 16(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EG 1(6) amended 30 June 2014 section 69(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EG 1(6)(a) replaced 2 June 2016 section 16(3) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EG 1(10) foreign source income amended 21 December 2010 section 55(1) Taxation (GST and Remedial Matters) Act 2010 Section EG 1 list of defined terms derived from New Zealand repealed 21 December 2010 section 55(2)(a) Taxation (GST and Remedial Matters) Act 2010 Section EG 1 list of defined terms notify inserted 2 June 2016 section 16(4) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EG 1 list of defined terms source in New Zealand inserted 21 December 2010 section 55(2)(b) Taxation (GST and Remedial Matters) Act 2010
EG 2: Adjustment for changes to accounting practice
When this section applies
1: This section applies in an income year (the year of change
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 earlier 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 earlier 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 2004 No 35 s EG 2
EG 3: Allocation of
income, deductions, and tax credits Section EG 3 repealed 1 April 2010 section 122(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EH: Income equalisation schemes
Contents
Introductory provisions
EH 1: Income equalisation schemes
Description
1: An income equalisation scheme allows a person to reduce their net income for a tax year by making a deposit with the Commissioner for the corresponding income year. Two
2: The 2
a: the main income equalisation scheme sections EH 3 to EH 36 and EZ 80
b:
c: the thinning operations income equalisation scheme sections EH 63 to EH 79 Meaning of terms
3: Terms used in the 2
a: terms used specifically in the main income equalisation scheme are defined in sections EH 34 to EH 36
b:
c: terms used specifically in the thinning operations income equalisation scheme are defined in sections EH 78 EH 79 adverse event income equalisation scheme Commissioner corresponding income year deposit income main income equalisation scheme net income person tax year thinning operations income equalisation scheme 2004 No 35 s EH 1 Section EH 1(2) heading amended 18 March 2019 section 166(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EH 1(2) amended 26 June 2019 section 61 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EH 1(2)(a) amended 30 March 2021 section 36(1) section 36(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EH 1(2)(b) repealed 18 March 2019 section 166(2) section 166(5) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EH 1(3) amended 18 March 2019 section 166(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EH 1(3)(b) repealed 18 March 2019 section 166(4) section 166(5) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 2: Deposits to be paid into Crown Bank Account
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 a Crown Bank Account. Commissioner deposit pay person Section EH 2 replaced 30 March 2022 section 83 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 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
b: a fisher
c: a forester
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 business company farmer fisher fishing business forester income from forestry main income equalisation scheme Maori authority New Zealand person public authority 2004 No 35 s EH 3 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 an accounting 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 an accounting 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 an accounting 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 accounting year; and
ii: the person’s main maximum deposit for the accounting year. Time of making deposit
4: A person makes a deposit for an accounting year by—
a: making the deposit during the accounting year; or
b: doing both the following:
i: making the deposit during the specified period for the accounting year; and
ii: at the time of making it, giving the Commissioner notice that the deposit is for the accounting 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 accounting 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 accounting year. Limit on making deposit
5: If a refund has been made to a person for an accounting year under section EH 13 EH 15 , or has been used for the purpose stated in section EH 15(3)(a) accounting year business Commissioner deposit farmer fisher fishing business forester income from forestry main deposit main income equalisation account main maximum deposit notice pay person specified period 2004 No 35 s EH 4 Section EH 4(5) amended 18 March 2019 section 167(1) section 167(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
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 FC 2
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 EZ 80 EZ 81 amount Commissioner deposit interest liquidation main income equalisation account pay person 2004 No 35 s EH 5 Section EH 5(5) amended 30 March 2021 section 37 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 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 2004 No 35 s EH 6 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 accounting year; and
b: their main maximum deposit for the accounting year. Timing of deduction
3: The person is allowed the deduction in the accounting year. accounting year amount corresponding income year deduction deposit main maximum deposit person 2004 No 35 s EH 7 Refunds: automatic
EH 8: Refund of excess deposit
When this section applies
1: This section applies when a person’s deposits for an accounting year are more than their main maximum deposit for the accounting year. Refund
2: The Commissioner must refund the excess to the person as soon as practicable after the date the deposit ends. accounting year Commissioner date the deposit ends deposit main maximum deposit person 2004 No 35 s EH 8
EH 9: Income does not include excess deposit
A refund under section EH 8 section CX 51 excluded income 2004 No 35 s EH 9
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 accounting year for which the deposit was made. Refund
2: The Commissioner must refund the deposit to the person. Section EH 28 accounting year Commissioner deposit main income equalisation account person year 2004 No 35 s EH 10
EH 11: Income when refund given at end of 5 years
A refund under section EH 10 section CB 27 income income year person 2004 No 35 s EH 11 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:
b: state the grounds on which it is made; and
c: state the amount applied for. amount apply Commissioner liquidation main income equalisation account person trustee 2004 No 35 s EH 12 Section EH 12(2)(a) repealed 2 June 2016 section 17(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EH 12 list of defined terms apply inserted 2 June 2016 section 17(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EH 13: Refund on
application 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 EZ 80 EZ 81 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 apply Commissioner date the deposit ends deposit main income equalisation account person year 2004 No 35 s EH 13 Section EH 13 heading amended 2 June 2016 section 18(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EH 13(1) amended 30 March 2021 section 38 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EH 13 list of defined terms apply inserted 2 June 2016 section 18(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EH 14: Income when refund given on
application Year of income
1: A refund under section EH 13 section CB 27 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 an accounting 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 accounting year to which the specified period or the longer period relates. Different year of income
3: The refund is income, under section CB 27 accounting year apply Commissioner income income year person specified period 2004 No 35 s EH 14 Section EH 14 heading amended 2 June 2016 section 19(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EH 14 list of defined terms apply inserted 2 June 2016 section 19(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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 self-assessed 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 apply business Commissioner date the deposit ends deposit fishing business main income equalisation account person self-assessed adverse event 2004 No 35 s EH 15 Section EH 15 list of defined terms apply inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EH 16: Income when refund given for development or recovery
Year of income
1: A refund under section EH 15 section CB 27 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 an accounting 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 accounting year to which the specified period or the longer period relates. Different year of income
3: The refund is income, under section CB 27 accounting year apply Commissioner income income year person specified period 2004 No 35 s EH 16 Section EH 16 list of defined terms apply inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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 2004 No 35 s EH 17
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 27 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 an accounting 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 accounting year. Different year of income
3: The amount allocated by the person to the earlier accounting year is income, under section CB 27 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 corresponding to the accounting year in which they retire:
b: a further time allowed by the Commissioner in a case or class of cases. accounting year amount Commissioner corresponding income year deposit income income year notice person return of income tax year 2004 No 35 s EH 18
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 FC 2 Section EH 28 amount Commissioner date the deposit ends main income equalisation account person trustee 2004 No 35 s EH 19
EH 20: Income when refund given on death
Year of income
1: A refund under section EH 19 section CB 27 When year of income may be different
2: However, section EH 21 EH 22 income person 2004 No 35 s EH 20
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 accounting year. Different year of income
2: The amount allocated by the trustee to the earlier accounting year is income, under section CB 27 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. accounting year amount Commissioner corresponding income year deposit income notice person return of income trustee 2004 No 35 s EH 21
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 an accounting year or years after that date. Accounting year or years referred to in subsection (1)(b)
2: The accounting 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 accounting year for which a deposit or a part of a deposit was made, if the amount that the trustee allocates to a later accounting 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 accounting year remains in the person’s main income equalisation account until—
a: it is refunded to the trustee in the accounting 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 accounting year is income, under section CB 27 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 accounting year; and
ii: the accounting 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. accounting year amount Commissioner corresponding income year deposit income main income equalisation account notice person return of income trustee year 2004 No 35 s EH 22
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 2004 No 35 s EH 23
EH 24: Income when refund given on bankruptcy
A refund under section EH 23 section CB 27 income person 2004 No 35 s EH 24
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 2004 No 35 s EH 25
EH 26: Income when refund given on liquidation
A refund under section EH 25 section CB 27 income liquidation person 2004 No 35 s EH 26 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 2004 No 35 s EH 27
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 2004 No 35 s EH 28
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 2004 No 35 s EH 29 Tax credit
EH 30: When person entitled to tax credit
A person who is given a refund is entitled to a tax credit 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 person 2004 No 35 s EH 30
EH 31: Kind and amount of refund that entitles person to tax credit
Kind
1: A refund that entitles a person to a tax credit is 1 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 accounting year in which the refund is given; if the refund comes in part from a deposit made for the accounting year in which the refund is given and in part from a deposit made for some other accounting year, the refund that entitles the person to a tax credit is the part coming from the deposit for some other accounting year. Amount
2: Once a refund qualifies under subsection (1) as a refund that entitles a person to a tax credit, 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 earlier accounting years by subtracting the deposit or deposits or parts of deposits from which the refund comes. accounting year amount deposit income income tax person tax credit 2004 No 35 s EH 31
EH 32: Kind of person entitled to tax credit
A person in the following circumstances is entitled to a tax credit:
a: the person’s income in the accounting 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 corresponding to the accounting year is increased; and
c: the amount by which the person’s income tax liability for the corresponding tax year is increased because of the refund (the extra tax tax saving accounting year amount deposit income income tax income tax liability person tax credit tax year 2004 No 35 s EH 32
EH 33: Amount of tax credit
The amount of a tax credit to which a person is entitled under section EH 30 section EH 32(c) section EH 32(c) amount income tax tax credit 2004 No 35 s EH 33 Definitions
EH 34: Meaning of income from forestry
Income
1: Income from forestry
a: means income derived from either or both of the disposals
b: includes permanent forestry income. Disposals
2: The disposals
a: the disposal
b: the disposal 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 disposal income income from forestry New Zealand own permanent forestry income person timber 2004 No 35 s EH 34 Section EH 34(1) substituted 7 December 2009 section 18(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EH 34(1)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EH 34(1)(b) replaced 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section EH 34(2) heading replaced 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EH 34(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EH 34(2)(a) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EH 34(2)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EH 34(3)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EH 34 list of defined terms permanent forestry income inserted 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section EH 34 list of defined terms PFSI forestry income repealed 23 June 2020 section 279 Climate Change Response (Emissions Trading Reform) Amendment Act 2020
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 , other than section EZ 4B Mycoplasma bovis
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 corresponding to the accounting year if—
i: the farmer derived income only from the farming or agricultural business in the accounting year; and
ii: 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 corresponding to the accounting year if the fisher derived income only from the fishing business in the accounting 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 corresponding to the accounting year if the forester derived only income from forestry in the accounting 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 an accounting year or for every accounting year is—
a: an amount calculated in the manner specified in the order; or
b: an unlimited amount. Secondary legislation
7: An Order in Council under subsection (6) is secondary legislation ( see Part 3 accounting year amount business corresponding income year deposit farmer fisher fishing business forester income main income equalisation account main maximum deposit net income income year pay person tax year 2004 No 35 s EH 35 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EH 35(2)(a) amended 30 March 2021 section 39(1) section 39(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EH 35(3)(b)(ii) repealed 18 March 2019 section 168(1) section 168(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EH 35(7) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EH 35(7) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
EH 36: 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 accounting 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 deposit
a: means a main deposit; and
b: includes, for the purposes of sections EH 6(2) to (4) EH 10 to EH 33 EZ 80(3) and (7)(b) 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 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; and
b: the period from the end of the accounting year that corresponds to the tax year to the date 1 month after the date by which the person must, under section 37 accounting year apply business Commissioner date the deposit ends deposit fishing business interest liquidation main deposit main income equalisation account main income equalisation scheme pay person return of income specified period tax year year 2004 No 35 s EH 37 Section EH 36 deposit amended 30 March 2021 section 40 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EH 36 list of defined terms apply inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Adverse event income equalisation scheme Heading repealed 18 March 2019 section 169(1) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Application Heading repealed 18 March 2019 section 169(1) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 37: Persons to whom adverse event income equalisation scheme applies
Section EH 37 repealed 18 March 2019 section 169(2) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Deposits and accounts Heading repealed 18 March 2019 section 169(2) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 38: Adverse event deposit
Section EH 38 repealed 18 March 2019 section 169(3) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 39: Adverse event income equalisation account
Section EH 39 repealed 18 March 2019 section 169(3) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Interest Heading repealed 18 March 2019 section 169(3) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 40: Interest on deposits in adverse event income equalisation account
EH 40 repealed 18 March 2019 section 169(4) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Deduction Heading repealed 18 March 2019 section 169(4) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 41: Deduction of deposit
Section EH 41 repealed 18 March 2019 section 169(5) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Refunds: automatic Heading repealed 18 March 2019 section 169(5) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 42: Refund of excess deposit
Section EH 42 repealed 18 March 2019 section 169(6) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 43: Income does not include excess deposit
Section EH 43 repealed 18 March 2019 section 169(6) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Refunds: on application Heading repealed 18 March 2019 section 169(6) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 44: Application for refund by person, trustee of estate, Official Assignee, or liquidator
Section EH 44 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 45: Refund on
application Section EH 45 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 46: Income when refund given on
application Section EH 46 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 47: Refund on retirement
Section EH 47 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 48: Income when refund given on retirement, and election to allocate amount to earlier year
Section EH 48 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 49: Refund on death
Section EH 49 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 50: Income when refund given on death
Section EH 50 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 51: Income when refund given on death, and election to allocate amount to earlier year
Section EH 51 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 52: Income when refund given on death, and election to allocate amount to later year or years
Section EH 52 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 53: Refund on bankruptcy
Section EH 53 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 54: Income when refund given on bankruptcy
Section EH 54 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 55: Refund on liquidation
Section EH 55 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 56: Income when refund given on liquidation
Section EH 56 repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Refunds: general provisions Heading repealed 18 March 2019 section 169(7) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 57: Amendment of assessment
Section EH 57 repealed 18 March 2019 section 169(8) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 58: Minimum refund
Section EH 58 repealed 18 March 2019 section 169(8) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 59: Deposits from which refunds come
Section EH 59 repealed 18 March 2019 section 169(8) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Transfers Heading repealed 18 March 2019 section 169(8) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 60: Transfer of deposit
Section EH 60 repealed 18 March 2019 section 169(9) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Definitions Heading repealed 18 March 2019 section 169(9) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
EH 61: Meaning of adverse event maximum deposit
Section EH 61 repealed 18 March 2019 section 169(10) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EH 61(3) amended 30 March 2021 section 41 section 41(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
EH 62: Other definitions
Section EH 62 repealed 18 March 2019 section 169(10) section 169(11) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Thinning operations income equalisation scheme Application
EH 63: Persons to whom thinning operations income equalisation scheme applies
Person described
1: The thinning operations income equalisation scheme applies to a company that, in an accounting 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 accounting year business company forestry business income New Zealand person thinning operations thinning operations income equalisation scheme 2004 No 35 s EH 65 Section EH 63 list of defined terms forestry business inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Deposits and accounts
EH 64: 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 an accounting year in which they derive income from carrying out thinning operations. Upper limit of deposit
2: A person must not make, for an accounting year, deposits that in total are more than their thinning operations maximum deposit for the accounting year. Lower limit of deposit
3: A person must not make, for an accounting 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 accounting year and their thinning operations maximum deposit for the accounting year. Time of making deposit
4: A person makes a deposit for an accounting year by—
a: making the deposit during the accounting year; or
b: doing both the following:
i: making the deposit during the specified period for the accounting year; and
ii: at the time of making it, giving the Commissioner notice that the deposit is for the accounting 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 accounting 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 accounting year. Limit on making deposit
5: If a refund has been made to a person for an accounting year under section EH 71 EH 73 accounting year business Commissioner deposit income notice pay person specified period thinning operations thinning operations deposit thinning operations income equalisation account thinning operations maximum deposit 2004 No 35 s EH 66
EH 65: 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 66 Amounts not available to others
4: Despite section FC 2
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 68 EH 71 EH 73 EH 75 amount Commissioner deposit interest liquidation pay person thinning operations income equalisation account 2004 No 35 s EH 67 Interest
EH 66: 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 2004 No 35 s EH 68 Deductions
EH 67: 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 accounting year; and
b: their thinning operations maximum deposit for the accounting year. Timing of deduction
3: The person is allowed the deduction in the accounting year. accounting year amount deduction deposit person thinning operations maximum deposit 2004 No 35 s EH 69 Refunds: automatic
EH 68: Refund of excess deposit
When this section applies
1: This section applies when a person’s deposits for an accounting year are more than their thinning operations maximum deposit for the accounting year. Refund
2: The Commissioner must refund the excess to the person as soon as practicable after the date the deposit ends. accounting year Commissioner date the deposit ends deposit person thinning operations maximum deposit 2004 No 35 s EH 70
EH 69: Income does not include excess deposit
A refund under section EH 68 section CX 51 excluded income 2004 No 35 s EH 71 Refunds: on application
EH 70: 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 71 EH 73
b: the liquidator appointed for the person may apply under section EH 75 Application
2: An application for a refund must—
a:
b: state the grounds on which it is made; and
c: state the amount applied for. amount apply Commissioner liquidation person thinning operations income equalisation account 2004 No 35 s EH 72 Section EH 70(2)(a) repealed 2 June 2016 section 23(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EH 70 list of defined terms apply inserted 2 June 2016 section 23(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EH 71: Refund on
application 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 73 EH 75 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 apply Commissioner date the deposit ends deposit person thinning operations income equalisation account year 2004 No 35 s EH 73 Section EH 71 heading amended 2 June 2016 section 24(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EH 71 list of defined terms apply inserted 2 June 2016 section 24(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EH 72: Income when refund given on
application Year of income
1: A refund under section EH 71 section CB 27 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 an accounting 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 accounting year to which the specified period or the longer period relates. Different year of income
3: The refund is income under section CB 27 accounting year apply Commissioner corresponding income year income income year person specified period 2004 No 35 s EH 74 Section EH 72 heading amended 2 June 2016 section 25(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EH 72 list of defined terms apply inserted 2 June 2016 section 25(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EH 73: 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 apply business Commissioner date the deposit ends deposit forestry business person thinning operations income equalisation account 2004 No 35 s EH 75 Section EH 73 list of defined terms apply inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EH 73 list of defined terms forestry business inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
EH 74: Income when refund given for development or recovery
Year of income
1: A refund under section EH 73 section CB 27 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 an accounting 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 accounting year to which the specified period or the longer period relates. Different year of income
3: The refund is income under section CB 27 accounting year apply Commissioner corresponding income year income income year person specified period 2004 No 35 s EH 76 Section EH 74 list of defined terms apply inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EH 75: 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 2004 No 35 s EH 77
EH 76: Income when refund given on liquidation
A refund under section EH 75 section CB 27 income liquidation person 2004 No 35 s EH 78 Refunds: general provisions, and tax credits
EH 77: 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 2004 No 35 s EH 79 Definitions
EH 78: 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 accounting 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 an income year other than the income 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) accounting year amount business deposit forestry business income income year person thinning operations thinning operations income equalisation account thinning operations maximum deposit 2004 No 35 s EH 80 Section EH 78 list of defined terms forestry business inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
EH 79: 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 68
b: the date on which the Commissioner receives the application for the refund, when section EH 71 EH 73
c: the date on which the Commissioner receives notice of the liquidation, when section EH 75 deposit
a: means a thinning operations deposit; and
b: includes, for the purposes of sections EH 66(2) to (4) EH 70 to EH 77 specified period
a: the period of 6 months after the end of the accounting year that corresponds to the tax year; and
b: the period from the end of the accounting year that corresponds to the tax year to the date 1 month after the date by which the person must, under section 37 thinning operations thinning operations deposit section EH 64(1) thinning operations income equalisation account section EH 65 apply Commissioner date the deposit ends interest liquidation pay person return of income specified period tax year thinning operations thinning operations deposit thinning operations income equalisation account thinning operations income equalisation scheme 2004 No 35 s EH 81 Section EH 79 list of defined terms apply inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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 24 CB 25 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 apply Commissioner income income year timber year 2004 No 35 s EI 1 Section EI 1(3) amended 2 June 2016 section 26(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EI 1 list of defined terms apply inserted 2 June 2016 section 26(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 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 an earlier income year of the lender. amount income year interest money lent New Zealand pay 2004 No 35 s EI 2 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
b: for an allocation under subsection (3), the person must apply Some definitions
6: In this section,— author first publication lump sum payment apply author Commissioner first publication income income year lump sum payment pay royalty tax year year 2004 No 35 s EI 3 Section EI 3(5)(a) amended 2 June 2016 section 27(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EI 3(5)(b) amended 2 June 2016 section 27(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EI 3 list of defined terms apply inserted 2 June 2016 section 27(3) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EI 4: Spreading income from patent rights
When this section applies
1: This section applies when a person derives income under section CB 30 Disposal 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. income income year patent right 2004 No 35 s EI 3B Section EI 4(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Land
EI 4B: Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence
When this section applies
1: This section applies when a person, in an income year, derives an amount that is income under section CC 1B section DB 20B
a: in relation to a right (the land right
b: in relation to a period (the spreading period
i: beginning with the commencement, or a renewal or extension, of the land right; and
ii: ending before the earliest following date on which the land right may be terminated, or may expire, if not extended or renewed. Exception for amount of income under section CC 1 or CG 8
2: This section does not apply to an amount that is income under section CC 1 CG 8 Timing of income and deductions for land right with spreading period
3: If the amount is incurred or derived—
a: before the end of the spreading period, the amount is allocated in equal portions to each month that—
i: includes part of the spreading period; and
ii: ends after the amount is incurred or derived; and
iii: is included in an income year ending within 50 years from the beginning of the spreading period; and
b: at or after the end of the spreading period, the amount is allocated to the income year in which it is incurred or derived. Effect for income of person ceasing to have estate in land
4: If an amount of income would be allocated to a spreading period of a land right under subsection (3) for a person in the absence of this subsection, the amount is allocated to an income year (the balance year
a: at the beginning of the balance year, the person holds the land right, or the estate in land from which the land right is granted; and
b: in the balance year, the person ceases to hold the land right, or the estate in land from which the land right is granted; and
c: the amount would be allocated under subsection (3) to an income year—
i: ending before, or including, the end of the spreading period; and
ii: after the balance year. Effect for deduction of person ceasing to have leasehold estate or licence
5: If an amount of a deduction would be allocated to a spreading period of a land right under subsection (3) for a person (the affected person balance year
a: at the beginning of the balance year, either or both of the land right and the estate in land from which the land right is granted are held by the affected person or a person associated with the affected person; and
b: at the end of the balance year, neither of the land right and the estate in land from which the land right is granted are held by the affected person or a person associated with the affected person; and
c: the amount would be allocated under subsection (3) to an income year—
i: ending before, or including, the end of the spreading period; and
ii: after the balance year. Effect for deduction of early termination of leasehold estate or licence
5B: If an amount of a deduction would be allocated to a spreading period of a land right under subsection (3) for a person (the affected person balance year
a: the affected person holds the estate in land from which the land right is granted; and
b: the land right is surrendered or terminated in the balance year. Relationship between subsections
6: Subsections (4), (5), and (5B) override subsection (3). amount associated deduction estate income income year land leasehold estate own Section EI 4B inserted 17 July 2013 section 48(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EI 4B(5B) heading inserted 30 June 2014 section 70(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EI 4B(5B) inserted 30 June 2014 section 70(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EI 4B(6) replaced 30 June 2014 section 70(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
EI 5: 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 6
5: This section overrides section CC 2(2) section EI 6 amount Commissioner income income year notice return of income 2004 No 35 s EI 4
EI 6: 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 5
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 5 amount income income year own tax year 2004 No 35 s EI 5
EI 7: 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 person may choose to—
a: divide the income into 6 equal portions; and
b: allocate a portion to the income year in which they derive the amount; and
c: similarly allocate a portion to each of the next 5 income years. Notice
3: The following provisions apply to an allocation for the purposes of subsection (2):
a: the person must notify the Commissioner of their election
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. Transitional provision: 2015–16 and later income years
5: Despite subsection (2), when a person has derived an amount of income to which this section applies before the 2015–16 income year, and all or part of that amount remains unallocated at the start of that income year, the person must—
a: if the period of 5 income years after the income year of derivation has expired by the start of the 2015–16 income year, allocate the remaining amount to the 2015–16 income year; or
b: if the period of 5 income years after the income year of derivation has not expired before the start of the 2015–16 income year, divide the remaining amount into equal portions based on the number of income years left in the period, and allocate a portion to each of those income years falling after the end of the 2014–15 income year. amount Commissioner income income year lease notice pay tax year 2004 No 35 s EI 6 Section EI 7(2) replaced 1 April 2015 section 71(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EI 7(3)(a) amended 1 April 2015 section 71(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EI 7(5) heading inserted 1 April 2015 section 71(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EI 7(5) inserted 1 April 2015 section 71(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EI 7 list of defined terms amount inserted 1 April 2015 section 71(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
EI 8: Disposal of land to the Crown
Section EI 8 repealed 29 March 2025 section 49 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Shareholder-employees
EI 9: Matching rule for employment income of shareholder-employee
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 when no longer treated as 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 2004 No 35 s EI 8
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 24 CB 25 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 2004 No 35 s EJ 1
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 19 or 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 sale or exchange amount business deduction fishing boat fishing business income year New Zealand tax year 2004 No 35 s EJ 2 Section EJ 2(1) amended 30 March 2017 section 68 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EJ 2(1) amended 2 November 2012 section 39(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EJ 2(6) fishing boat amended 2 November 2012 section 39(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EJ 2(6) fishing business amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 acquiring
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. How elections made
5: An election under this section is made as follows:
a: a person makes an election under subsection (2) by taking a tax position on that basis in their return of income for the income year to which they choose to allocate some or all of the expenditure:
b: a person makes an election under subsection (4),—
i: paragraph (a), by taking a tax position on that basis in their return of income for the income year in which the person ceases to carry on the business:
ii: paragraph (b), by notifying the Commissioner 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. Extension of time: elections under subsection (4)(b)
5B: The Commissioner may extend the time limit imposed under subsection (5)(b)(ii) in any case or class of cases. Personal representative
6: An election under subsection (4) may be made by a deceased’s personal representative. Elections under subsection (2) irrevocable
7: An election made under subsection (2) cannot be revoked. business Commissioner deduction income year New Zealand notify return of income tax position 2004 No 35 s EJ 3 Section EJ 3(1)(b) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EJ 3(5) heading replaced 30 March 2021 section 42(1) section 42(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EJ 3(5) replaced 30 March 2021 section 42(1) section 42(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EJ 3(5B) heading inserted 30 March 2021 section 42(1) section 42(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EJ 3(5B) inserted 30 March 2021 section 42(1) section 42(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EJ 3(7) heading inserted 30 March 2021 section 42(2) section 42(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EJ 3(7) inserted 30 March 2021 section 42(2) section 42(4) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EJ 3 list of defined terms notice repealed 30 March 2021 section 42(3)(b) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EJ 3 list of defined terms notify inserted 30 March 2021 section 42(3)(a) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EJ 3 list of defined terms tax position inserted 30 March 2021 section 42(3)(a) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 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 allowed under section DS 1
b: the deduction is allowed under section DS 2 large budget film grant 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— (completed months ÷ non-completed months) × deduction. Definition of items in formula
4: In the formula,—
a: completed months
b: non-completed months
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 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 amount completed deduction feature film film film income film right income year large budget film grant remaining deduction 2004 No 35 s EJ 4 Section EJ 4(1) substituted 1 April 2008 section 360 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 4(1)(b) substituted 1 January 2010 section 123(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EJ 4(1)(b) amended 7 September 2010 section 32(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EJ 4 list of defined terms government screen production payment repealed 7 September 2010 section 32(2)(a) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EJ 4 list of defined terms large budget film grant inserted 7 September 2010 section 32(2)(b) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
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 allowed under section DS 1
b: the deduction is allowed under section DS 2 large budget film grant 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 amount completed deduction feature film film film income film right income year large budget film grant remaining deduction 2004 No 35 s EJ 5 Section EJ 5(1) substituted 1 April 2008 section 361 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 5(1)(b) substituted 1 January 2010 section 124(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EJ 5(1)(b) amended 7 September 2010 section 33(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EJ 5 list of defined terms government screen production payment repealed 7 September 2010 section 33(2)(a) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EJ 5 list of defined terms large budget film grant inserted 7 September 2010 section 33(2)(b) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
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 2004 No 35 s EJ 6
EJ 7: Film production expenditure for New Zealand films
having no large budget film grant New Zealand films
1: A deduction under section DS 2
a: the film is not one for which a large budget film grant
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 large budget film grant New Zealand 2004 No 35 s EJ 7 Section EJ 7 heading amended 7 September 2010 section 34(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EJ 7 heading amended 1 January 2010 section 125(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EJ 7 heading amended 1 April 2008 section 362(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 7(1) substituted 1 April 2008 section 362(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 7(1)(a) substituted 1 January 2010 section 125(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EJ 7(1)(a) amended 7 September 2010 section 34(2) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EJ 7 list of defined terms government screen production payment repealed 7 September 2010 section 34(3)(a) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EJ 7 list of defined terms large budget film grant inserted 7 September 2010 section 34(3)(b) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
EJ 8: Film production expenditure for other films having no
large budget film 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 film grant
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 amount completed deduction film film income film production expenditure film right income year large budget film grant New Zealand remaining deduction 2004 No 35 s EJ 8 Section EJ 8 heading substituted 1 April 2008 section 363(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 8 heading amended 7 September 2010 section 35(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EJ 8 heading amended 1 January 2010 section 126(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EJ 8(1) substituted 1 April 2008 section 363(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 8(1)(a) substituted 1 January 2010 section 126(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EJ 8(1)(a) amended 7 September 2010 section 35(2) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EJ 8 list of defined terms government screen production payment repealed 7 September 2010 section 35(3)(a) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EJ 8 list of defined terms large budget film grant inserted 7 September 2010 section 35(3)(b) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010
EJ 9: Avoidance arrangements
The allocation of a deduction under any of sections EJ 4 EJ 5 EJ 7 EJ 8
a: section GB 18
b: section GB 19 deduction film production expenditure film right pay 2004 No 35 ss GC 11B GD 12A GD 12B Leases
EJ 10: 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; and
d: is not an operating lease to which section EJ 10B 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— (part of term ÷ term of the lease) × total of payments. Definition of items in formula
4: In the formula,—
a: part of term
b: term of the lease section YA 1
c: total of payments finance lease income year lease lessee operating lease pay personal property lease asset personal property lease payment specified lease term of the lease 2004 No 35 s EJ 9 Section EJ 10(1)(d) inserted 30 March 2021 section 43(1) section 43(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EJ 10 list of defined terms operating lease inserted 30 March 2021 section 43(2) section 43(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
EJ 10B: IFRS leases
When this section applies
1: This section applies in relation to an operating lease of a personal property lease asset (the IFRS lease
a: the person, as lessee, uses NZ IFRS 16 in their financial statements for the IFRS lease; and
b: the lessor for the IFRS lease is not associated with the person; and
c: the person does not sublease the personal property lease asset to another person; and
d: the person irrevocably chooses to use this section for the IFRS lease, as evidenced by a return of income made in accordance with this section. Deduction: de minimis
2: If the initial right of use asset under NZ IFRS 16 is $100,000 or less and the remaining term of the IFRS lease under NZ IFRS 16 is 4 years or less initially and immediately after any extension starts, then the person, as lessee for the IFRS lease, is allowed, for an income year, a deduction for a positive amount, and has income for a negative amount, for the total amount recognised by the person through their profit and loss account for the IFRS lease for the income year, if the amount is in accordance with NZ IFRS 16. Deduction: formula
3: If subsection (2) does not apply, then the person, as lessee for the IFRS lease, is allowed, for an income year, a deduction for a positive amount, and has income for a negative amount, for amounts calculated using the formula— accounting amount − add-back adjustment + impairment and revaluation adjustment − make-good and direct costs adjustment. Definition of items in formula
4: In the formula in subsection (3),—
a: accounting amount
b: add-back adjustment
i: impairment of the lease asset described in paragraph 33 of NZ IFRS 16 arising in the income year:
ii: revaluation or impairment of the lease asset described in paragraph 35 of NZ IFRS 16 arising in the income year:
c: impairment and revaluation adjustment
d: make-good and direct costs adjustment
i: make-good costs for the lease described in paragraph 24(d) of NZ IFRS 16:
ii: direct costs for the lease described in paragraph 24(c) of NZ IFRS 16, if the person chooses to apply this subparagraph, as evidenced by a return of income made in accordance with this subparagraph. Deduction: incurred
5: The person, as lessee, is allowed a deduction for the IFRS lease for—
a: make-good costs, described in subsection (4)(d)(i), for the income year that they incur the costs:
b: direct costs, described in subsection (4)(d)(ii), for the income year that they incur the costs, if they have chosen to apply subsection (4)(d)(ii). Wash-up: income or deduction
6: The person, as lessee, has income is allowed a deduction IFRS deductions − IFRS income − expenditure. Definition of items in formula
7: In the formula in subsection (6),—
a: IFRS deductions
b: IFRS income
c: expenditure Transitional deduction: retrospective treatment spread forward
8: If the person has applied NZ IFRS 16 retrospectively for the IFRS lease or has not applied this section for the IFRS lease while they have applied NZ IFRS 16 for it, then the person is allowed a deduction for a positive amount and has income for a negative amount, spread in equal proportions over the income year and the following 4 income years, calculated using the formula— retrospective accounting expenditure − retrospective tax adjustments − previous tax deductions. Definition of items in formula
9: In the formula in subsection (8),—
a: retrospective accounting expenditure
b: retrospective tax adjustments
c: previous tax deductions amount deduction income income year NZ IFRS 16 operating lease person personal property lease asset Section EJ 10B inserted 30 March 2021 section 44(1) section 44(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EJ 10B(6) amended 30 March 2022 section 84(1)(a) section 84(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EJ 10B(6) amended 30 March 2022 section 84(1)(b) section 84(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
EJ 11: 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 21 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 2004 No 35 s EJ 10 Petroleum mining
EJ 12: Petroleum development expenditure: default allocation rule
When this section applies
1: This section applies to a petroleum miner's petroleum development expenditure that relates to petroleum mining developments in a permit area and that is incurred on or after 1 April 2008, when section EJ 12B Default allocation rule
2: For the purposes of section DT 5(2)(a) Relationship with other petroleum mining provisions
3: Sections EJ 13 to EJ 16 Sections DT 7 DT 8 DT 10 DT 11 and DT 16 amount deduction income year permit area petroleum development expenditure petroleum miner petroleum mining development Section EJ 12 substituted 6 October 2009 section 127(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EJ 12(3) amended 1 April 2018 section 70(1) section 70(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
EJ 12B: Petroleum development expenditure: reserve depletion method
When this section applies
1: This section applies to a petroleum miner's petroleum development expenditure that relates to petroleum mining developments in a permit area, when 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) (reserve expenditure − previous expenditure) 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 13 to EJ 16 Sections DT 7 DT 8 DT 10 DT 11 and DT 16 amount deduction income year permit area petroleum development expenditure petroleum miner petroleum mining development Section EJ 12B inserted 6 October 2009 section 127(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EJ 12B(9) amended 1 April 2018 section 71(1) section 71(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
EJ 13: Permanently ceasing petroleum mining operations
When this section applies
1: This section applies when a petroleum miner and each farm-in party to a farm-out arrangement, if any, to which the petroleum miner is a party, permanently ceases petroleum mining operations—
a: in a permit area for which the petroleum miner holds a petroleum permit; and
b: for which petroleum development expenditure has been incurred. Amount of deduction for petroleum miner
2: The amount of the deduction that the petroleum miner is allowed is the difference between—
a: the amount of the deduction allowed for the petroleum miner under section DT 5
i: the permit; or
ii: an asset of the kind described in section CT 7(1)(b) or (c)
b: any part of the deduction for the petroleum miner allocated to, or treated as allocated to, earlier income years under section EJ 12(2) EJ 12B(3) Amount of deduction for farm-in party
3: The amount of the deduction that the farm-in party is allowed is the difference between—
a: the amount of the deduction allowed for the farm-in party under section DT 14
i: the permit; or
ii: an asset of the kind described in section CT 7(1)(b) or (c)
b: any part of the deduction for the farm-in party allocated to, or treated as allocated to, earlier income years under section EJ 12(2) EJ 12B(3) Timing of deduction
4: For the purposes of section DT 5(2)(c) amount deduction farm-in party farm-out arrangement income year permit area petroleum development expenditure petroleum miner petroleum mining operations petroleum permit Section EJ 13 replaced 1 April 2018 section 72(1) section 72(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
EJ 13B: 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 12 EJ 12B 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 13B inserted 6 October 2009 section 129(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EJ 13C: 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 section EJ 12B
c: part of a deduction under section DT 5 section EJ 12B 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 13C inserted 6 October 2009 section 129(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EJ 14: Spreading deduction backwards
Section EJ 14 repealed 1 April 2018 section 73(1) section 73(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
EJ 15: 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 12 EJ 12B 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 16
4: This section is overridden by section EJ 16 amount deduction dispose income income year petroleum miner petroleum mining asset 2004 No 35 s EJ 13 Section EJ 15(2)(b) substituted 6 October 2009 section 130(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EJ 16: 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 15 amount associated person dispose income income year net income petroleum miner petroleum mining asset 2004 No 35 s EJ 14
EJ 17: Partnership interests and disposal of part of asset
In sections EJ 12 to EJ 16
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 2004 No 35 s EJ 15
EJ 18: Petroleum mining operations outside New Zealand
Sections EJ 12 to EJ 17 EJ 20
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 12 to EJ 17 EJ 20 controlled foreign company decommissioning New Zealand petroleum miner petroleum mining operations 2004 No 35 s EJ 16 Section EJ 18 amended 1 April 2018 section 74(1) section 74(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EJ 18(b) amended 1 April 2018 section 74(2) section 74(4) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EJ 18 list of defined terms decommissioning inserted 1 April 2018 section 74(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Definitions
EJ 19: Meaning of offshore development
Section EJ 19 repealed 6 October 2009 section 131(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EJ 20: Meaning of petroleum mining development
Meaning
1: In sections EJ 12 EJ 12B 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: decommissioning 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. decommissioning permit area petroleum Section EJ 20 substituted 6 October 2009 section 131(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EJ 20(2)(d) amended 1 April 2018 section 75(1) section 75(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EJ 20 list of defined terms decommissioning inserted 1 April 2018 section 75(2)(a) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EJ 20 list of defined terms removal or restoration operations repealed 1 April 2018 section 75(2)(b) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Mineral mining Heading inserted 1 April 2014 section 50 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
EJ 20B: Certain mining expenditure spread over assumed life of mine
When this section applies
1: This section applies for the purposes of section DU 6
a: incurs an amount of mining development expenditure or mining exploration expenditure as described in that section; and
b: starts to use the mining permit area to derive income; and
c: either does not meet the requirements to allow allocation of the expenditure under section EJ 20E Spreading rule
2: The mineral miner is allowed a deduction for an income year that falls within the spreading period referred to in section EJ 20C rate × value. Definition of items in formula
3: The items in the formula are defined in subsections (4) and (5). Rate
4: Rate
a: the straight-line rate set out in schedule 12 section EJ 20D(2)
b: the diminishing value rate set out in schedule 12 Value
5: Value
a: the adjusted tax value of the expenditure, if the mineral miner chooses to use the straight-line method:
b: the diminished value of the expenditure for the income year, if the mineral miner chooses to use the diminishing value method. Allocation to mines
6: For the purposes of this section, a mineral miner may allocate expenditure for an income year under this section in relation to a mine rather than in relation to a mining permit area, but only if—
a: the mineral miner uses IFRS rules to prepare their financial statements; and
b: the allocation is permitted for the purposes of their statements. adjusted tax value amount deduction diminishing value method diminishing value rate financial statements IFRS mineral miner mining development expenditure mining exploration expenditure permit area straight-line method straight-line rate Section EJ 20B inserted 1 April 2014 section 50 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
EJ 20C: Length of spreading period
When this section applies
1: This section applies for the purposes of section EJ 20B(3) Start and end dates
2: The spreading period is the number of income years that represents the assumed life of the mine referred to in section EJ 20D
a: starting from the later of—
i: the first day of the income year in which the mineral miner's commercial production of a listed industrial mineral from the mining permit area starts; or
ii: the first day of the income year in which the expenditure is incurred; and
b: ending on the last day of the income year in which the expiry of the assumed life of the mine occurs. commercial production income year listed industrial mineral mineral miner permit area Section EJ 20C inserted 1 April 2014 section 50 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
EJ 20D: Measurement of assumed life of mine and application to rate
When this section applies
1: This section applies for the purposes of section EJ 20B(4)(a) rate section EJ 20C Formula for straight-line rate
2: The formula for the straight-line rate is— 100% ÷ assumed life. Definition of item in formula
3: In the formula, assumed life
a: the period that—
i: the mineral miner uses for accounting purposes as the amortisation period for the mining permit area; or
ii: for a mineral miner that is not required to use an amortisation period for their accounts, the mineral miner estimates is a reasonable period for the commercial production of a listed industrial mineral from the mining permit area; and
b: the period that is not more than 25 years from the later of—
i: the date on which commercial production from the mining permit area starts; and
ii: the date on which the mineral miner incurs the expenditure relating to the mining permit area. Reassessment of life of mine
4: A mineral miner must reassess the assumed life of the mine for the purposes of this section and sections DU 11 EJ 20C the end of each income year commercial production deduction income year listed industrial mineral mineral miner permit area straight-line rate Section EJ 20D inserted 1 April 2014 section 50 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section EJ 20D(3) replaced 30 June 2014 section 73(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EJ 20D(4) amended section 73(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
EJ 20E: Certain mining expenditure spread on basis of units of production
When this section applies
1: This section applies for the purposes of section DU 7
a: incurs expenditure described in section DU 6(1)(a)
b: starts to use the permit area to derive income; and
c: either—
i: uses IFRS rules to prepare their financial statements; or
ii: keeps appropriate records that are sufficient to enable the Commissioner to verify the calculations used by the mineral miner; and
d: chooses to apply this section in the way described in subsection (2). Election
2: The mineral miner may make an election to apply this section in relation to the permit area in a return of income for an income year that is the first year in which the miner's commercial production of a listed industrial mineral from the mining permit area starts. The election is irrevocable and applies only to expenditure referred to in subsection (1)(a). Reserve depletion method
3: The deduction for the expenditure incurred by the mineral miner and allocated to an income year is calculated using the formula— (reserve expenditure − previous expenditure) Definition of items in formula
4: In the formula,—
a: reserve expenditure the total amount of the mineral miner's expenditure described in section DU 6(1)(a)
b: previous expenditure
c: reserve depletion for the year
d: proven and probable reserves Crown Minerals (Minerals other than Petroleum) Regulations 2007 Appropriate units of measure
5: In subsection (4)(c) and (d), the amount must be expressed in an appropriate unit of measure as set out in the mineral miner's reserve statement, and must be the same measure used in the formula for the items defined in those paragraphs. Mines and mining permit areas
6: For the purposes of this section, a mineral miner may allocate expenditure for an income year under this section in relation to a mine rather than in relation to a mining permit area, but only if—
a: the mineral miner uses IFRS rules to prepare their financial statements; and
b: the allocation in relation to the mine is permitted for the purposes of those statements. Transitional provision for existing mines
7: Despite subsection (2), a mineral miner may make an election to apply this section in relation to an existing permit area for the 2014–15 income year. The election is irrevocable and applies to expenditure incurred by the mineral miner in the permit area for the income year and later income years. amount associated mining operations commercial production Commissioner deduction financial statements general permission IFRS income income year listed industrial mineral mineral miner mining operations permit area return of income Section EJ 20E inserted 1 April 2014 section 50 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section EJ 20E(4)(a) amended 30 June 2014 section 74(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EJ 20E list of defined terms mining development expenditure repealed 30 June 2014 section 74(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Superannuation contributions
EJ 21: 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 7 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 2004 No 35 s EJ 19 Research, development, and resulting market development
EJ 22: Deductions for market development: product of research, development
When this section applies
1: This section applies when a person is allowed a deduction for expenditure
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 under section DB 34(7)
a: after the income year in which the person incurs the expenditure; and
b: in the way required by section EJ 23 deduction development income year research 2004 No 35 s EJ 20 Section EJ 22(1) amended 29 March 2018 section 76(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
EJ 23: Allocation of deductions for research, development, and resulting market development
When this section applies
1: This section applies when a person has—
a: a deduction for expenditure incurred on research or development that the person chooses to allocate under section DB 34(7)
b: a deduction for an amount of depreciation loss for an item used for research or development, that the person chooses to allocate under section EE 1(5)
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 22(2) Timing of deduction
2: The person must allocate the deduction to an income year—
a: in which the person derives an amount of income that is 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 an amount of depreciation loss that may be allocated under this section:
b: to which under 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 an income year 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 loss balance may be carried forward under Part I
ii: have not been allocated to income years before the current year. amount assessable income deduction depreciation loss development income year loss balance research 2004 No 35 s EJ 21 Aircraft engine overhauls Heading inserted 1 April 2017 section 69(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EJ 24: Allocation of expenditure on aircraft engine overhauls
When this section applies
1: This section applies when a person is allowed a deduction under section DW 5 DW 6 Allocation of deduction: general rule
2: A person who does not make an election under section EJ 25 EJ 26 Exception: allocation of deduction when early aircraft engine overhaul
3: If the person performs in an income year an aircraft engine overhaul during the scheduled overhaul period relating to the preceding acquisition or aircraft engine overhaul of the aircraft engine, the person must allocate to the income year the part of the deduction for the preceding acquisition or aircraft engine overhaul that would otherwise be allocated under subsection (2) to a later income year. Exception: allocation of deduction when lease ends
4: If the person leases an aircraft engine, or an aircraft including an unpriced aircraft engine, under a lease that ends before the end of the scheduled overhaul period relating to the preceding acquisition or aircraft engine overhaul of the aircraft engine, the person must allocate to the income year in which the lease ends the part of the deduction for the preceding acquisition or aircraft engine overhaul that would otherwise be allocated under subsection (2) to a later income year. aircraft engine aircraft engine overhaul associated person business deduction income year lease scheduled overhaul period unpriced aircraft engine Section EJ 24 inserted 1 April 2017 section 69(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EJ 25: Allocation of expenditure on aircraft engine overhauls: election by IFRS user
Election
1: A person may elect to quantify and allocate under this section the amount of a deduction allowed by section DW 5 DW 6
a: the person is a New Zealand resident or holds a valid certificate of registration for the aircraft from the Director of Civil Aviation under the Civil Aviation Act 2023
b: the person uses IFRS rules to prepare financial statements; and
c: the aircraft is treated under the IFRS rules as being owned by the person or is leased by the person under a finance lease. Adjusted figures from financial statements
2: A person who elects to rely on this subsection must quantify and allocate deductions under section DW 5 DW 6 Currency of election
3: An election under this section applies for each assessment that is made by the person—
a: after the person—
i: reaches any necessary agreement under subsection (2)
ii: notifies the Commissioner of the election when or before making a return based on the elected approach; and
iii: is notified that the Commissioner accepts the election, if the Commissioner has previously notified the person under paragraph (d)
b: before the person’s return for an income year for which the person does not meet the requirements of subsection (1)
c: before the person notifies the Commissioner, when or before making a return based on an approach other than the elected approach, that the election is revoked; and
d: before the person is notified that the Commissioner will not accept assessments based on the elected approach. Grounds for Commissioner’s refusal
4: The Commissioner may give to the person a notice referred to in subsection (3)(d) subsection (3)(a)(iii) aircraft engine Commissioner deduction finance lease financial statements IFRS income year lease New Zealand resident notice notify return Section EJ 25 inserted 1 April 2017 section 69(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EJ 25(1)(a) amended 5 April 2025 section 486 Civil Aviation Act 2023
EJ 26: Allocation of expenditure on aircraft engine overhauls: election by operator of single aircraft
Election
1: A person may elect to quantify and allocate under this section the amount of a deduction allowed by section DW 5 DW 6
a: no more than 1 aircraft is operated in business by the person and persons who are associated with the person other than by blood relationship; and
b: no more than 1 aircraft is operated in a particular business by the person and a person who is associated with the person by blood relationship. Expenditure on acquisition and overhaul of aircraft engines
2: A person who elects to rely on this subsection to the income year must—
a: allocate a deduction under section DW 5(2)
b: treat each aircraft engine as an unpriced aircraft engine for the purposes of section DW 5 Currency of election
3: An election under this section applies for each assessment that is made by the person—
a: after the person notifies the Commissioner of the election, when or before making a return based on the approach required by subsection (2); and
b: before the person’s return for the third consecutive income year in which the person does not meet the requirements of subsection (1)
c: before the person notifies the Commissioner, when or before making a return based on an approach other than the elected approach, that the election is revoked. aircraft engine associated person business deduction income year notice notify return unpriced aircraft engine Section EJ 26 inserted 1 April 2017 section 69(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EJ 27: Disposal of aircraft engine or aircraft
When this section applies
1: This section applies when a person—
a: is allowed a deduction under section DW 5 DZ 22
b: disposes of the aircraft engine or aircraft. Allocation of remaining deductions
2: The person must allocate to the income year in which the disposal occurs the part of the deduction under section DW 5 DZ 22 Allocation of consideration
3: The person must allocate the consideration derived for the disposal between—
a: the aircraft engine or aircraft as an item of depreciable property; and
b: the unexpired portion of the scheduled overhaul period for the aircraft engine. Allocation of consideration by agreement
4: The allocation by the person under subsection (3) must be—
a: the apportionment agreed with the purchaser; or
b: a fair and reasonable apportionment, if there is no agreed apportionment under paragraph (a). Recovery income
5: The person derives from the disposal an amount of income equal to—
a: the total amount of deductions under section DW 5 DZ 22
b: the amount of consideration allocated under subsection (3) to the unexpired portion of the scheduled overhaul period for the aircraft engine, if paragraph (a) does not apply. Sections CC 11 and FA 9: consideration paid by lessee for lease asset
6: For the purposes of sections CC 11 FA 9 Sections CC 12 and FA 10: consideration derived by lessor from disposal of lease asset
7: For the purposes of sections CC 12 FA 10 aircraft engine aircraft engine overhaul deduction dispose finance lease income income year scheduled overhaul period unpriced aircraft engine Section EJ 27 inserted 1 April 2017 section 69(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EK: Environmental restoration accounts
Contents
EK 1: Payment to Crown Bank Account
Every payment a person makes to the Commissioner under section EK 2
a: is public money; and
b: must be paid into a Crown Bank Account. Commissioner pay Section EK 1 replaced 30 March 2022 section 85 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
EK 2: Persons who may make payment to environmental restoration account
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 8
ii: is of a kind listed in schedule 19, part B or making of noise
iii: is of a kind not listed in schedule 19, part C
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 pay revenue account property 2004 No 35 s EK 2 Section EK 2(b)(ii) amended 18 March 2019 section 170 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
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 pay 2004 No 35 s EK 3
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: An amount entered in a person’s environmental restoration account may not, while 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 an asset for the payment of the person’s debts or liabilities, except when the person is bankrupt or has been put into liquidation:
d: be an asset 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 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 administering 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 pay 2004 No 35 s EK 4
EK 5: Details to be provided with payment to environmental restoration account
Notice and details required
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. Time for providing information
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 notice pay working day 2004 No 35 s EK 5 Section EK 5 list of defined terms notice inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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 pay year 2004 No 35 s EK 6
EK 7: Deduction for payment
When this section applies
1: This section applies when 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— payment ÷ tax rate. Definition 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 set out in schedule 1 Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits
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 pay tax year taxable income 2004 No 35 s EK 7 Section EK 7(5)(a) amended 1 April 2008 section 562 Taxation (Business Taxation and Remedial Matters) Act 2007
EK 8: Deduction for transfer
When this section applies
1: This section applies when 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— transfer ÷ tax rate. Definition 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 set out in schedule 1 Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits
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 pay tax year taxable income 2004 No 35 s EK 8 Section EK 8(5)(a) amended 1 April 2008 section 562 Taxation (Business Taxation and Remedial Matters) Act 2007
EK 9: Refund of payment if excess, lacking details
When this section applies
1: This section applies when 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 pay 2004 No 35 s EK 9
EK 10: Certain refunds not income
A refund under section EK 9 section CX 52 excluded income 2004 No 35 s EK 10
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 kind that is listed in schedule 19, part B or making of noise schedule 19, part C
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:
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. apply Commissioner environmental restoration account income year 2004 No 35 s EK 11 Section EK 11(1)(a) amended 18 March 2019 section 171 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EK 11(2)(a) repealed 2 June 2016 section 29(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EK 11 list of defined terms apply inserted 2 June 2016 section 29(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EK 12: Refund if
application 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 is more than the maximum account balance for an income year. Refund if application
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 kind that is listed in schedule 19, part B or making of noise schedule 19, part C
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— amount ÷ tax rate. Definition of items in formula
4: In the formula,—
a: amount
b: tax rate
i: is set out in schedule 1 Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits
ii: would apply to the person for the tax year if the person had sufficient taxable income. Amount of refund if expenditure incurred
5: 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 meets the requirements of subsection (2)(a)(i) to (iii). Amount of refund if maximum account balance decreases
6: 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. Relationship with section EK 17
7: Section EK 17 amount apply Commissioner environmental restoration account income tax income year maximum account balance pay tax year taxable income 2004 No 35 s EK 12 Section EK 12 heading amended 2 June 2016 section 30(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EK 12(2) heading amended 2 June 2016 section 30(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EK 12(2)(a)(i) amended 18 March 2019 section 172 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EK 12(4)(b)(i) amended 1 April 2008 section 562 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EK 12 list of defined terms apply inserted 2 June 2016 section 30(3) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EK 13: Income when refund given on
application A refund under section EK 12 section CB 28 apply Commissioner income income year 2004 No 35 s EK 13 Section EK 13 heading amended 2 June 2016 section 31(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EK 13 list of defined terms apply inserted 2 June 2016 section 31(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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:
b: state the grounds on which the application is made; and
c: state the amount of the transfer that the applicant wants. apply Commissioner environmental restoration account 2004 No 35 s EK 14 Section EK 14(2)(a) repealed 2 June 2016 section 32(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EK 14 list of defined terms apply inserted 2 June 2016 section 32(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EK 15: Transfer on
application When this section applies
1: This section applies when—
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 application
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
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 requirements of subsection (3) not met
4: If the nominated person does not meet 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). apply Commissioner environmental restoration account pay 2004 No 35 s EK 15 Section EK 15 heading amended 2 June 2016 section 33(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EK 15(2) heading amended 2 June 2016 section 33(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EK 15 list of defined terms apply inserted 2 June 2016 section 33(3) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EK 16: Transfer on death, bankruptcy, or liquidation
When this section applies
1: This section applies when a person—
a: has an environmental restoration account; and
b: does 1 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 notified Transfer by Commissioner
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 on the date on which—
a: the person dies, if subsection (1)(b)(i) applies:
b: the person becomes bankrupt, if subsection (1)(b)(ii) applies:
c: the person is put into liquidation, if subsection (1)(b)(iii) applies. Relationship with section EK 17
5: Section EK 17 Transfer treated as payment
6: A transfer to the environmental account of a person under subsection (3) is treated as a payment by the person to their environmental account. Year of income
7: The amount of a transfer under this section is income, under section CB 28 amount Commissioner environmental restoration account income liquidation notify pay 2004 No 35 s EK 16 Section EK 16(2) amended 2 June 2016 section 34(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EK 16 list of defined terms notify inserted 2 June 2016 section 34(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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 2004 No 35 s EK 17
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 pay 2004 No 35 s EK 18
EK 19: Environmental restoration account of amalgamating company
If an amalgamating company with an environmental restoration account ends its existence on 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 pay 2004 No 35 s EK 19
EK 20: Environmental restoration account of consolidated group company
Company with environmental restoration account
1: A company that is part of a consolidated group may have an environmental restoration account. Nominated company for group acting on behalf of company
2: The nominated company for the consolidated group may act on behalf of the group company 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 group companies on the basis of the individual obligations of the companies to incur expenditure of a kind listed in schedule 19, part B or making of noise schedule 19, part C apply consolidated group environmental restoration account nominated company pay 2004 No 35 s EK 20 Section EK 20(4) amended 18 March 2019 section 173 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EK 20 list of defined terms apply inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EK 21: Notices 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 electronic format notice 2004 No 35 s EK 21 Section EK 21 list of defined terms notice inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EK 22: Meaning of maximum payment
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 is more than the amount in the environmental restoration account at the end of the income year:
b: the amount, if any, calculated under subsection (3) for the person and the income year. 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 referred to in subsection (2)(b) 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 calculated using the formula— level increase + (year × 0.2 × initial level) − contents. Definition 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 pay 2004 No 35 s EK 22
EK 23: Other definitions
Meaning of maximum account balance
1: In this subpart, maximum account balance
a: if the person does not meet the requirements of section EK 2
b: if the person meets the requirements of section EK 2 provision × tax rate. Definition of items in formula
2: In the formula,—
a: provision
i: is of a kind listed in schedule 19, part B or making of noise
ii: is not of a kind listed in schedule 19, part C
b: tax rate
i: is set out in schedule 1 Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits
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 2004 No 35 s EK 23 Section EK 23(2)(a)(i) amended 18 March 2019 section 174 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EK 23(2)(b)(i) amended 1 April 2008 section 562 Taxation (Business Taxation and Remedial Matters) Act 2007
EL: Allocation of deductions for excess residential land expenditure
Subpart EL inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Introductory provisions Heading inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 1: Outline of subpart: general
General outline
1: The provisions in this subpart, in general,—
a: limit a person’s deductions for expenditure incurred in relation to residential land to income derived from the land; and
b: suspend deductions for the excess expenditure for the income year in which the expenditure is incurred; and
c: provide that the excess amounts are carried forward to later income years in which the person derives residential income; and
d: release the excess amounts on fully-taxed disposals of land. Allocation rules
2: Separate allocation rules apply for—
a: residential rental property, see the outline in section EL 2(1) to (6)
b: bright-line disposals of residential land, see the outline in section EL 2(7) amount deduction dispose income income year residential land residential rental property Section EL 1 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 2: Outline of subpart: specific provisions
Residential rental property
1: Sections EL 4 to EL 8 Application by portfolio or on property-by-property basis
2: The rules in sections EL 4 to EL 8
a: to a person’s residential portfolio:
b: by election, on a property-by-property basis. Portfolios plus particular properties
3: A person may choose to apply the rules on a property-by-property basis for an income year to 1 or more properties while applying the rules on a portfolio basis in relation to other properties owned by them. Use of amounts
4: If a person has excess expenditure under section EL 4 Exclusions
5: The following sections set out the properties to which the deduction allocation rule in section EL 4
a: section EL 9
b: section EL 10
c: section EL 11
d: section EL 12 subpart DG
e: section EL 13 Rules for certain entities
6: The following sections modify the general rules in this subpart:
a: section EL 14
b: section EL 15
c: sections EL 16 to EL 19 Bright-line disposals of residential land
7: Section EL 20 derives income under section CB 6A amount associated person company deduction employee income year interest loss own residential income residential land residential land-rich entity residential portfolio residential rental property revenue account property wholly-owned group of companies Section EL 2 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EL 2(5) amended 30 March 2021 section 45(1) section 45(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EL 2(7) amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
EL 3: Definitions for this subpart
In this subpart,— land sales provisions sections CB 6A to CB 15 residential income
a: rental income which is the amount of income the person derives under sections CC 1 to CC 2
ab: income which is the amount that the person derives under section CC 3
b: depreciation recovery income which is the amount that the person derives under section CG 1
c: an amount of net income that the person would have for the corresponding tax year if their only income were income under the land sales provisions from a disposal of property in their residential portfolio:
d: an amount of net income that the person would have for the corresponding tax year if their only income were income referred to in paragraphs (a), (b), and (c) section EL 4 section EL 10 residential land-rich entity
a: a close company, partnership, or look-through company if more than 50% of its assets by value are residential land, whether the land is owned directly or indirectly, see section EL 19
b: a trustee of a trust whose property includes residential rental property if more than 50% of the trust’s assets by value are residential land, whether the land is owned directly or indirectly, see section EL 19 residential portfolio
a: means 1 or more residential rental properties that a person holds in a portfolio for an income year; and
b: includes a residential rental property that the person has included in their portfolio, whether or not they retain ownership of the property, in the period that—
i: starts at the beginning of the income year in which they first acquire a residential rental property that is included in their portfolio; and
ii: ends on the last day of the income year in which they dispose of the last of the residential rental properties included in their portfolio; and
c: does not include a residential rental property in relation to which a person is applying the rules on a property-by-property basis under section EL 6 residential rental property
a: means residential land for which a person who owns the land is allowed a deduction relating to the use or disposal of the land; and
b: includes land that, for a time in an income year, is residential land; and
c: does not include properties that are excluded from the application of section EL 4 sections EL 9 EL 10 EL 11 EL 12 EL 13 acquire amount close company deduction depreciation recovery income dispose income income year land sales provisions look-through company net income own partnership residential income residential land residential land-rich entity residential portfolio residential rental property tax year trustee Section EL 3 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EL 3 land sales provisions amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EL 3 land sales provisions amended 30 March 2021 section 46(1) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EL 3 residential income inserted 1 April 2022 section 86(1) section 86(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EL 3 residential income amended 23 March 2020 section 106(b) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EL 3 residential rental property amended 30 March 2021 section 46(2)(a) section 46(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EL 3 residential rental property inserted 30 March 2021 section 46(2)(b) section 46(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Allocation rules for residential rental property Heading inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 4: Allocation of deductions for loss-making residential rental properties
When this section applies
1: This section applies for an income year when a person is allowed a deduction for expenditure or loss incurred in relation to 1 or more properties in their residential portfolio, excluding any amount of a deduction under section DB 23 Limited allocation
2: The amount of the deduction that may be allocated to the income year must be no more than the amount of the person’s residential income for the income year. An amount identified as a person’s residential income may be counted only once in making an allocation under this subpart. Excess amounts carried forward
3: To the extent to which the amount of the person’s deduction is more than their residential income, the excess amount is—
a: suspended as a deduction for the income year; and
b: carried forward to a later income year in which the person derives residential income; and
c: added to the amount of the deduction for expenditure or loss referred to in subsection (1) for the later income year. Relationship with sections EL 5, EL 6, and EL 7
4: The application is modified by—
a: section EL 6
b: sections EL 5 EL 7 amount deduction dispose income year loss residential income residential portfolio residential rental property Section EL 4 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EL 4(2) amended 23 March 2020 section 107 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
EL 5: When residential portfolios sold
When this section applies
1: This section applies for an income year (the current income year
a: disposes of the last of the properties in their residential portfolio; and
b: has an unused excess amount under section EL 4(3) Disposal of fully-taxed portfolio: excess amounts released
2: If the person derives income under the land sales provisions for the current income year or for an earlier income year from the disposal of each of the properties in their residential portfolio, any unused excess amount relating to the portfolio is released from the application of the limited allocation rule in section EL 4(2) see Disposal of incompletely-taxed portfolios: excess amounts carried forward
3: If the person does not derive income under the land sales provisions for the current income year or for an earlier income year from the disposal of each of the properties in their residential portfolio, any unused excess amount relating to the portfolio—
a: is an amount to which section EL 4(3)
b: is treated as a deduction referred to in section EL 4(1) Basis of allocation
4: For the purposes of subsection (3)(b), it does not matter whether the allocation of the transferred amount is made on a portfolio basis or on a property-by-property basis. When subsection (6) applies
5: Subsection (6) applies in relation to a disposal described in subsection (2) when—
a: an unused excess amount was transferred to the portfolio from another of the person’s properties that was not included in the portfolio; and
b: the person did not derive income from the disposal of the other property. Reduction and transfer to another residential rental property
6: An unused excess amount that would otherwise be released under subsection (2) is—
a: reduced by an amount equal to the total unused excess amount transferred from the other property; and
b: to the extent of the amount transferred, is a deduction referred to in section EL 4(1) amount deduction dispose income income year land sales provisions residential income residential portfolio residential rental property Section EL 5 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EL 5(2) amended 23 March 2020 section 108(1) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EL 5(5) heading inserted 23 March 2020 section 108(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EL 5(5) inserted 23 March 2020 section 108(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EL 5(6) heading inserted 23 March 2020 section 108(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EL 5(6) inserted 23 March 2020 section 108(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
EL 6: Choosing to apply rules on property-by-property basis
Choosing other basis for calculation
1: For the purposes of section EL 4 residential income section EL 3 section EL 4(2) property A
a: they own residential rental properties other than property A:
b: those other properties are included in a residential portfolio. Property A: income and expenditure
2: For the purposes of section EL 4(3) Property A: excess amounts carried forward
3: An excess amount arising under section EL 4(3)
a: suspended as a deduction for the income year; and
b: carried forward to a later income year in which the person derives residential income from property A; and
c: added to the amount of the deduction for expenditure or loss referred to in section EL 4(1) Election requirements
4: A person makes an election under subsection (1) by taking a tax position on that basis in their return of income for the income year in which the property becomes their residential rental property. Effect of changes in tax positions
5: The election remains in effect for income years in which the person continues to take the tax position but if the person changes their tax position, property A becomes a property included in a residential portfolio. Transitional rule for property acquired before 2019–20 income year
6: For the purposes of subsection (4), for residential rental property held at the start of the 2019–20 income year, the person must make the election referred to in subsection (1) in the return of income for that income year. amount deduction income income year loss residential income residential portfolio residential rental property return of income tax position Section EL 6 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 7: When property A sold
When this section applies
1: This section applies for an income year when a person—
a: has chosen to apply the rules in this subpart on a property-by-property basis under section EL 6 property A)
b: disposes of property A, whether or not it is residential rental property for the person at the time of the disposal; and
c: has an unused excess amount under section EL 4(3) Taxed disposal of property A: excess amounts released
2: If the person derives income under the land sales provisions from the disposal of property A, any unused excess amount relating to property A is released from the application of the limited allocation rule in section EL 4(2) see Non-taxed disposal of property A: excess amounts carried forward
3: If the person disposes of property A but does not derive income under the land sales provisions from the disposal, any unused excess amount relating to property A—
a: is an amount to which section EL 4(3)
b: is treated as a deduction referred to in section EL 4(1) Basis of allocation
4: For the purposes of subsection (3)(b), it does not matter whether the allocation of the transferred amount is made on a portfolio basis or on a property-by-property basis. When subsection (6) applies
5: Subsection (6) applies in relation to a disposal described in subsection (2) when—
a: an unused excess amount was transferred to property A from another of the person’s properties; and
b: the person did not derive income from the disposal of the other property. Reduction and transfer to another residential rental property
6: An unused excess amount that would otherwise be released under subsection (2) is—
a: reduced by an amount equal to the total unused excess amount transferred from the other property; and
b: to the extent of the amount transferred, is treated as a deduction referred to in section EL 4(1) amount deduction dispose income income year land sales provisions residential income residential rental property Section EL 7 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EL 7(2) amended 23 March 2020 section 109(1)(a) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EL 7(2) amended 23 March 2020 section 109(1)(b) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EL 7(5) heading inserted 23 March 2020 section 109(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EL 7(5) inserted 23 March 2020 section 109(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EL 7(6) heading inserted 23 March 2020 section 109(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section EL 7(6) inserted 23 March 2020 section 109(2) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
EL 8: Treatment of previously transferred amounts on fully-taxed disposals
Section EL 8 repealed 23 March 2020 section 110 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Exclusions from rules Heading inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 9: Main home exclusion
General rule
1: Section EL 4 Beneficiaries
2: Subsection (1) applies to trust property when—
a: more than 50% of the land is used for most of the income year by a beneficiary of the trust as their main home; and
b: a principal settlor of the trust does not have a separate main home. income year principal settlor residential land Section EL 9 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 10: Exclusion for land held on revenue account
Land acquired for purposes of business relating to land
1: Section EL 4 section CB 7 Income under land sales rules
2: Section EL 4 section CB 7 Notification
3: In order for land to be excluded under subsection (2), the person must—
a: notify the Commissioner that the land is held on revenue account by the date for filing their return of income for the later of—
i: the income year in which they acquire the land:
ii: the income year in which the land becomes land that, when disposed of, will give rise to income under the land sales provisions:
iii: for land that is held at the start of the 2019–20 income year and is land that, when disposed of, will give rise to income under the land sales provisions, the 2019–20 income year:
b: be able to identify separately the deductions relating to the land. When separate identification not required
4: Subsection (3)(b) does not apply to a person if all of their residential land, other than land excluded under subsection (1) and sections EL 9 EL 12 EL 13
a: has given rise to income of the person under the land sales provisions:
b: will give rise to income under the land sales provisions, regardless of when the disposal occurs, and they have notified the Commissioner as described in subsection (3)(a). acquire Commissioner deduction dispose income income year land sales provisions notify residential land Section EL 10 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 11: Exclusion for property held by certain persons and entities
Section EL 4
a: a company other than a close company:
b: a person or entity listed in schedule 36 close company company residential land Section EL 11 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 12: Exclusion for mixed-use assets
Section EL 4 section DG 3 asset income year residential land Section EL 12 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 13: Exclusion for property provided as employee accommodation
Accommodation connected with employment or service
1: Section EL 4 Associated employees or workers
2: Subsection (1) does not apply if the employees or other workers are associated with the person, unless it is necessary for the person to provide the accommodation because of the nature or remoteness of a business carried on by them. associated person business employee employment residential land Section EL 13 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Application of rules by certain entities Heading inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 14: Continuity rules for companies
Despite sections EL 4 EL 5 EL 7 EL 16 sections IA 5 IB 3 IP 3 IP 3B amount company income year tax loss component Section EL 14 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EL 14 amended 30 March 2022 section 87 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EL 14 amended 30 March 2021 section 47 Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
EL 15: Transfers between companies in wholly-owned groups
Transferring unused amounts
1: If a company ( company A section EL 4(3) EL 5(3) EL 7(3) company B Company B’s deduction
2: The amount transferred is treated as a deduction for expenditure or loss referred to in section EL 4(1) When transfers made
3: The transfer of an excess amount is treated as made when both company A and company B take tax positions on that basis in their returns of income for the relevant income year. amount company deduction income year residential income residential rental property return of income wholly-owned group of companies Section EL 15 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EL 15(1) amended 23 March 2020 section 111 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Interposed entities Heading inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 16: Interests in residential land-rich entities
When this section applies
1: This section applies when a person—
a: has borrowed money and used it to acquire an interest in an entity that is, for an income year, a residential land-rich entity; and
b: has interest expenditure for the income year in relation to the amount borrowed for which they are allowed a deduction. Excess amounts carried forward
2: To the extent to which the portion of the person’s interest expenditure calculated under section EL 17(1) section EL 17(3)
a: suspended as a deduction for the income year; and
b: carried forward to a later income year in which the entity derives residential income; and
c: added to the amount of the interest expenditure referred to in subsection (1)(b) for the later income year. Modifications
3: The application of this section and section EL 17 section EL 18 acquire amount deduction income income year interest look-through company partnership residential income residential land residential land-rich entity Section EL 16 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EL 16(2)(b) replaced 23 March 2020 section 112 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
EL 17: Calculations for section EL 16
Calculation of interest expenditure
1: For the purposes of section EL 16(2) applied capital percentage × interest on borrowings. Definition of items
2: In the formula in subsection (1),—
a: applied capital percentage
b: interest on borrowings Calculation of share of net residential income
3: For the purposes of section EL 16(2) person’s interest × entity’s net residential income. Definition of items
4: In the formula in subsection (3),—
a: person’s interest
i: when the entity is a company, the person’s voting interest in the company measured at the end of the income year:
ii: when the entity is the trustee of a trust, the value of the person’s interest in residential rental property that is trust property as a percentage of the trust’s assets, measured at the end of the income year:
b: entity’s net residential income section EL 4 acquire amount company income income year interest net income residential income residential rental property tax year trustee voting interest Section EL 17 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 18: Modifications when entities transparent
For the purposes of sections EL 16 EL 17
a: the person’s residential income for the income year from property held by the entity section EL 17(3)
b: when the entity has chosen under section EL 6 property A section EL 17
i: the item applied capital percentage section EL 17(2)(a)
ii: the residential income derived by the person for the income year from property A is treated as their share of net residential income under section EL 17(3) income year look-through company partnership residential income residential rental property Section EL 18 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EL 18(a) amended 23 March 2020 section 113 Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
EL 19: Valuation of assets
Methods of valuation
1: For the purposes of section EL 17 residential land-rich entity section EL 3
a: for land, including an improvement to land, the amount set out in subsection (2):
b: for property with an adjusted tax value, its adjusted tax value:
c: for other property, its market value. Valuation of land
2: For the purposes of subsection (1)(a), the value of land is the following amount, as applicable:
a: the amount established by the later of—
i: the land’s most recent capital value or annual value as set by a local authority; or
ii: either the cost of the land on acquisition or, if the transaction involves an associated person, its market value:
b: for a leasehold estate in land, the market value of the land which the person may establish through a valuation made by a registered valuer no more than 3 years before the end of the income year. adjusted tax value amount associated person income year land leasehold estate local authority residential land-rich entity Section EL 19 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Allocation rules for bright-line disposals of land Heading inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EL 20: Allocation of deductions related to bright-line disposals of residential land
When this section applies
1: This section applies for an income year when a person—
a: derives income under section CB 6A (Disposal within 2 years: bright-line test for residential land)
b: is allowed a deduction under section DB 23 Limited allocation
2: The amount of the deduction that may be allocated to the income year must be no more than the amount calculated using the formula— bright-line income + net income from land. Definition of items in formula
3: In the formula,—
a: bright-line income CB 6A
b: net income from land sections CB 6 to CB 14 Excess amounts carried forward
4: To the extent to which the amount of the person’s deduction is more than the amount calculated under subsection (2), the excess amount is—
a: suspended as a deduction for the income year; and
b: carried forward to a later income year in which the person derives—
i: income referred to in subsection (1)(a):
ii: income under sections CB 6 to CB 14
c: added to the amount of the deduction referred to in subsection (1)(b) for the later income year. Disposals to associated persons
5: Subsections (6) and (7) apply when a person disposes of land described in subsection (1)(a) to an associated person. Limited allocation for associated disposals
6: Despite subsection (2), the amount of the person’s deduction for the income year of the disposal must be no more than the amount of the bright-line income referred to in subsection (3)(a) that they derive from the disposal. Expenditure of associated persons
7: To the extent to which the amount of the person’s deduction under subsection (6) is more than the bright-line income derived by the person, the excess amount is treated as expenditure of the associated person incurred in acquiring the land. amount associated person deduction dispose income income year net income residential land tax year Section EL 20 inserted 26 June 2019 section 62(1) section 62(2) and (3) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EL 20(1)(a) amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EL 20(1)(a) amended 30 March 2021 section 48(1) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EL 20(3)(a) amended 1 July 2024 section 127 Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EL 20(3)(a) amended 30 March 2021 section 48(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021
EM: Hedging of currency movements in Australian non-attributing shares and attributing FDR method interests
Subpart EM inserted 17 July 2013 section 49 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Contents
EM 1: Australian non-attributing shares and attributing FDR method interests
Application of this subpart
1: This subpart applies to determine the income and expenditure for a person's hedges, to the extent to which their hedges have a fair dividend rate hedge portion ( see sections EM 5 to EM 7
a: Australian non-attributing shares for which—
i: amounts derived from disposal would be either excluded income of the person under section CX 55
ii: the person determines the market value for each of a number of periods making up the income year:
b: attributing interests in a FIF for which the person—
i: calculates FIF income using the fair dividend rate method; and
ii: uses section EX 53 Specific rules
2: In this subpart,—
a: section EM 2
b: section EM 3
c: section EM 4
d: section EM 5
db: section EM 5B
e: section EM 6
f: section EM 7
g: section EM 8 Relationship with financial arrangements rules
3: This subpart, and not subpart EW fair dividend rate hedge portions. However, subpart EW determines a person’s income and expenditure for the portion of a hedge that is not a fair dividend rate hedge portion. attributing interests Australian non-attributing shares eligible hedge excluded income fair dividend rate hedge portion fair dividend rate method FIF hedge income Section EM 1 inserted 17 July 2013 section 49 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EM 1(1)(b)(ii) replaced 1 April 2016 section 129 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EM 1(2)(c) replaced 1 April 2022 section 88(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 1(2)(d) replaced 1 April 2022 section 88(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 1(2)(db) inserted 1 April 2022 section 88(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 1(3) amended 1 April 2022 section 88(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
EM 2: Who does this subpart apply to?
Who does this subpart apply to?
1: This subpart applies to a person if section EM 1
a: is listed in schedule 29, part A B
b: is a separate identifiable fund forming part of a life insurer that holds investment subject to life insurance policies under which benefits are directly linked to the value of the investments held in the fund:
c: is a fund that is equivalent to an investor class described in section HM 22(1)
d: is a group investment fund, superannuation fund, or unit trust in which—
i: 20 or more people hold an investor interest, and each person who holds an investor interest has 20% or less of the total investor interests for the fund or trust:
ii: a person described in paragraph (a) or (b) (a listed person charitable person Combining people and investor interests
2: For the purposes of applying subsection (1)(d)(i) and (ii), if a person is associated with another person, they are treated as 1 person who holds their combined investor interests, if their combined investor interests total 5% or more of the total investor interests for the fund or trust. Subsection (3) overrides this subsection. Exception to combining people and investor interests
3: Subsection (2) does not apply to make 2 associated people into 1 person, or to combine investor interests of 2 associated persons, if 1 of them is a listed person. associated person exempt income group investment fund income investor class investor interest life insurance policies life insurer superannuation fund unit trust Section EM 2 inserted 17 July 2013 section 49 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
EM 3: What hedges does this subpart apply to?
General rule
1: This subpart applies to a person's hedge (an eligible hedge section EM 1
a: is a contract to conditionally or unconditionally acquire or dispose of foreign exchange in return for New Zealand currency, or is a swap with one leg denominated in a foreign currency and the other leg denominated in New Zealand currency; and
b: is not an option; and
c: is not entered into with an associated person; and
d: has, under IFRSs, a fair value of zero when it is first entered into or is acquired at its fair value; and
e: is subject to an election under section EM 4 Exception
2: Despite subsection (1), this subpart applies and a person’s hedge is an eligible hedge section EM 1 section EM 5(4) and (5)
a: is a contract to conditionally or unconditionally acquire or dispose of any currency in return for any other currency, or is a swap with legs denominated in any currency; and
b: meets the requirements of subsection (1)(b) to (e); and
c: is entered into only to rebalance currency exposures for the person’s other eligible hedges. associated person eligible hedge hedge IFRS Section EM 3 inserted 17 July 2013 section 49 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EM 3(1) heading inserted 1 April 2022 section 89(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 3(1)(d) amended 1 April 2022 section 89(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 3(2) heading inserted 1 April 2022 section 89(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 3(2) inserted 1 April 2022 section 89(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
EM 4: Elections
Elections
1: This subpart applies to a person’s eligible hedges, to the extent to which the hedges have fair dividend rate hedge portions as a result of an election under this section. The portion of a person’s eligible hedge that is not a fair dividend rate hedge portion does not give rise to income or expenditure under this subpart, despite any election under this section for the eligible hedge. To the extent to which this subpart does apply to calculate income and expenditure ( see section EM 6 Hedge-by-hedge: specific
2: A person may choose to use a hedge-by-hedge method under section EM 5 Hedge-by-hedge: general
3: A person may choose to use a hedge-by-hedge method under section EM 5 Specific: effect
4: An election under subsection (2) is irrevocable for the life of the relevant hedge, unless the person may choose and does choose, under subsection (6), to use the portfolio method. General: effect
5: An election under subsection (3) may be changed before the relevant hedge and any hedge of the hedge is first entered into or acquired by the person, but is irrevocable for the life of the relevant hedge, unless the person may choose and does choose, under subsection (6), to use the portfolio method. Portfolio
6: A person that uses a unit valuation period section EX 53 section EM 5B Portfolio: effect
7: An election under subsection (6) is irrevocable for 2 years unless the Commissioner notifies the person that the person may revoke earlier. An election applies for all eligible hedges post-election, but does not have to be made before a relevant hedge is entered into. Also, a new election under subsection (6) cannot be made until 12 months after the end of an old election under subsection (6), unless the Commissioner notifies the person that the person may make a new election earlier. Commissioner eligible hedge fair dividend rate hedge portion income Section EM 4 replaced 1 April 2022 section 90 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
EM 5: Fair dividend rate hedge
portions: hedge-by-hedge methods Fair dividend rate hedge portions
1: This section calculates the maximum fair dividend rate hedge portions for a person’s eligible hedges on a hedge-by-hedge basis under an election provided by section EM 4 Choice of fair dividend rate hedge portion: cannot be changed
2: Choice of methods
3: A person may choose to use either the method in subsections (4) and (5), or the method in subsections (9) to (10D), to calculate the maximum or minimum, as the case may be, fair dividend rate hedge portions for all of the person’s eligible hedges when the relevant hedge is first entered into or acquired. They may not choose to use, for example, the method in subsections (4) and (5) for some hedges and the method in subsections (9) to (10D) for other hedges. First method
4: The maximum or minimum, as the case may be, calculation hedge first entered into or acquired (1.05 × (eligible currency assets + proxied currency assets) Definition of items in formula
5: In the formula in subsection (4), all items are expressed in the calculation currency ( see eligible currency assets
a: eligible currency assets
i: a person’s assets described in section EM 1(1)(a) and (b) calculation currency
ii: if the person chooses and is a qualifying hedge fund, their interests in assets that are owned by a multi-rate PIE, described in section EM 1(1)(a) and (b)
b: proxied currency assets
i: unless subparagraph (ii) or (iii) applies, the total market value of a person's assets described in section EM 1(1)(a) and (b) proxied currency
ii: zero, if the person has hedges denominated in the proxied currency:
iii: zero, if the person has a hedge, denominated in a currency other than the proxied currency or the calculation currency, that acts like hedging for the assets due to a relationship between exchange rate movements in the proxied currency and that other currency:
c: FDR hedges amount
d: calculation hedge amount Second formula
6: Definition of items in formula
7: Exception for more than 100% non-eligible currency asset hedges
8: If the amount calculated under subsection (4) or (9) is less than zero, then the maximum or minimum, as the case may be, fair dividend rate hedge portion for the relevant calculation hedge is zero. Second method
9: The maximum or minimum, as the case may be, fair dividend rate hedge portion for a person’s eligible hedge (the calculation hedge FDR gross amount × apportioned current hedge amount ÷ calculation hedge amount. Definition of items in formula
10: In the formula in subsection (9), all items are expressed in New Zealand currency, and—
a: FDR gross amount
b: apportioned current hedge amount
c: calculation hedge amount FDR gross amount
10B: For the purposes of subsection (10), the FDR gross amount
a: zero if the formula in this subsection does not calculate, when the hedge is first entered into or acquired, an amount; or
b: the lesser of 1 and the amount calculated using the following formula when the hedge is first entered into or acquired: (1.05 × eligible currency assets − FDR hedges amount) ÷ apportioned current hedge amount. Definition of items in FDR gross formula
10C: In the formula in subsection (10B)(b), all items are expressed in New Zealand currency, and—
a: eligible currency assets section EM 1(1)(a) and (b)
b: FDR hedges amount
c: apportioned current hedge amount Apportioned current hedge amount
10D: The apportioned current hedge amount
a: if the calculation hedge is not a hedge of a hedge, or is a hedge of a hedge and paragraph (b) does not apply, the amount is the lesser of the following amounts:
i: the amount of foreign currency hedged by the calculation hedge:
ii: the amount of foreign currency that is hedged by a person’s hedges including the calculation hedge less less
b: the negative of the amount of foreign currency that is hedged by a person’s FDR hedge portions excluding the calculation hedge, if—
i: the calculation hedge is a hedge of a hedge; and
ii: the amount of foreign currency that is hedged by a person’s FDR hedge portions excluding the calculation hedge plus equals Relationship with subject matter
11: Section EM 7 eligible hedge fair dividend rate hedge portion hedge income non-eligible assets Section EM 5 inserted 17 July 2013 section 49 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EM 5 heading amended 1 April 2022 section 91(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(1) heading replaced 1 April 2022 section 91(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(1) replaced 1 April 2022 section 91(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(2) heading repealed 1 April 2022 section 91(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(2) repealed 1 April 2022 section 91(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(3) heading replaced 1 April 2022 section 91(4) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(3) replaced 1 April 2022 section 91(4) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(4) heading amended 1 April 2022 section 91(5) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(4) amended 1 April 2022 section 91(6) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(4) amended 1 April 2022 section 91(7) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(5)(a) replaced 1 April 2022 section 91(8) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(6) heading repealed 1 April 2022 section 91(9) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(6) repealed 1 April 2022 section 91(9) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(7) heading repealed 1 April 2022 section 91(9) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(7) repealed 1 April 2022 section 91(9) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(8) replaced 1 April 2022 section 91(10) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(9) heading replaced 1 April 2022 section 91(11) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(9) replaced 1 April 2022 section 91(11) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(10) heading replaced 1 April 2022 section 91(11) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(10) replaced 1 April 2022 section 91(11) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(10B) heading inserted 1 April 2022 section 91(11) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(10B) inserted 1 April 2022 section 91(11) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(10C) heading inserted 1 April 2022 section 91(11) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(10C) inserted 1 April 2022 section 91(11) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(10D) heading inserted 1 April 2022 section 91(11) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5(10D) inserted 1 April 2022 section 91(11) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 5 list of defined terms non-eligible assets inserted 1 April 2022 section 91(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
EM 5B: Fair dividend rate hedge portions: portfolio method
Fair dividend rate hedge portions
1: This section calculates the fair dividend rate hedge portions for a person’s eligible hedges on a portfolio basis under an election provided by section EM 4 Lowest amount
2: The fair dividend rate hedge portion is the lowest of the amounts described in subsections (4) and (6). Period calculation
3: The fair dividend rate hedge portion is applied for a period of 1 month or less, as chosen by the person, for all of their eligible hedges. The fair dividend rate hedge portion is calculated before the start of the elected period, and the elected period is irrevocable, and is applied for all of their eligible hedges post-election, for the income year. First formula
4: For the purposes of subsection (2), the amount is calculated using formula— 1 − (non-eligible assets ÷ portfolio hedges amount). Definition of items in formula
5: In the formula in subsection (4), all items are expressed in New Zealand currency, and—
a: non-eligible assets
b: portfolio hedges amount Second formula
6: For the purposes of subsection (2), the amount is calculated using the formula— (1.05 × eligible assets) ÷ portfolio hedges amount. Definition of items in formula
7: In the formula in subsection (6), all items are expressed in New Zealand currency, and—
a: eligible assets section EM 1(1)(a) and (b)
b: portfolio hedges amount eligible hedge fair dividend rate hedge portion hedge non-eligible assets qualifying hedge fund Section EM 5B inserted 1 April 2022 section 92 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
EM 6: Income and expenditure for fair dividend rate hedge portions
Using the formula to calculate income and expenditure
1: A person uses the formula in subsection (2) for each valuation period described in subsection (3)(b) that this subpart applies to them. A positive amount from the formula is a person's income for their fair dividend rate hedge portions. A negative amount from the formula is a person's expenditure for their fair dividend rate hedge portions. Formula
2: The formula for determining a person's income and expenditure for their fair dividend rate hedge portions is— (FDR portions’ value + period gain − period loss) Definition of items in formula
3: In the formula,—
a: FDR portions' value
ab: period gain
ac: period loss
b: valuation period
i: the period described in section EM 1(1)(a)(ii)
ii: the unit valuation period described in section EX 53
c: days in the year amount fair dividend rate hedge portion income income year Section EM 6 inserted 17 July 2013 section 49 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EM 6(2) formula amended 1 April 2022 section 93(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 6(3)(ab) inserted 1 April 2022 section 93(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 6(3)(ac) inserted 1 April 2022 section 93(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 6(3)(b)(ii) replaced 1 April 2016 section 130 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EM 7: Quarterly test of fair dividend rate hedge portions
Quarterly FDR hedging ratio
1: A person must use the first formula, in subsection (2), on a day (the calculation day First formula
2: The formula for calculating the person's quarterly FDR hedging ratio is— FDR hedges amount ÷ eligible currency assets. Definition of items in formula
3: In the formula in subsection (2), all items are expressed in New Zealand currency, and—
a: FDR hedges amount
b: eligible currency assets section EM 1(1)(a) and (b) Second formula
4: If a person's quarterly FDR hedging ratio for a quarter is greater than 1.05 and subsection (6) does not apply, then, despite section EM 5 calculation day (0.85 ÷ quarterly FDR hedging ratio) × FDR hedge portion. Definition of items in second formula
5: In the formula in subsection (4),—
a: FDR hedge portion
b: quarterly FDR hedging ratio Relationship with subject matter
5B: This section overrides section EM 5 section EM 5B Subpart not applied for over-hedging
6: If a person's quarterly FDR hedging ratio is greater than 1.05 on the calculation day Subpart EW eligible hedge fair dividend rate hedge portion hedge income year person quarterly FDR hedging ratio Section EM 7 inserted 17 July 2013 section 49 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EM 7(1) replaced 1 April 2022 section 94(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 7(4) amended 1 April 2022 section 94(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 7(5B) heading inserted 1 April 2022 section 94(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 7(5B) inserted 1 April 2022 section 94(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 7(6) amended 1 April 2022 section 94(4) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
EM 8: Some definitions
In this subpart,— Australian non-attributing shares
a: are a share in a company resident in Australia at all times in the year when the person holds a right in the company; and
b: are not an attributing interest, because of the application of section EX 31 eligible hedge section EM 3 fair dividend rate hedge portion hedge
a: means 1 or more related financial arrangements that a person enters into with the sole purpose and net effect of offsetting exposure to foreign currency exchange rate movements in the value of their assets, and hedging
b: includes, in a hedge described in paragraph (a), a hedge of that hedge investor interest
a: if the relevant entity is a company, a shareholding that gives the holder an entitlement to a distribution of the proceeds from the entity's investments; or
b: if the relevant entity is not a company, an interest that, under the rules of the entity, gives the holder an entitlement to a proportion of the funds available for distribution of the proceeds from the entity's investments, and that distribution is the same as if the entity were a company and the holder were a shareholder in that company non-eligible assets
a: means assets that are denominated in a foreign currency and not described in section EM 1(1)(a) and (b)
b: does not include—
i: cash assets totalling less than 5% of the total market value of a person’s assets described in section EM 1(1)(a) and (b)
ii: eligible hedges:
iii: New Zealand securities listed on a recognised exchange and denominated in a foreign currency to the extent to which the securities are unhedged as to foreign currency qualifying hedge fund section EM 1(1)(a) and (b) quarterly FDR hedging ratio section EM 7(2) Section EM 8 inserted 17 July 2013 section 49 Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EM 8 non-eligible assets inserted 1 April 2022 section 95 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EM 8 qualifying hedge fund inserted 1 April 2022 section 95 Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022
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
a: the sections in this subpart; and
b: sections CC 3 DB 11 to DB 15 EZ 51 FB 9 GB 21 RA 11 RA 12
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 2004 No 35 s EW 1
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 2004 No 35 s EW 2 Meaning of financial arrangement and excepted financial arrangement
EW 3: What is a financial arrangement?
Meaning
1: Financial arrangement 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 notice pay 2004 No 35 s EW 3 Section EW 3 list of defined terms notice inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
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 2004 No 35 s EW 4
EW 5: What is an excepted financial arrangement?
Meaning
1: Excepted financial arrangement
a: an arrangement described in any of subsections (18) to (20) may cease to be an excepted financial arrangement through the operation of section EW 7
b: an arrangement described in any of subsections (21) to (25) 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 to the extent to which it is not life financial reinsurance
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(1)
b: a sporting event under a sports betting system administered under Part 4
c: gambling, including a New Zealand lottery, as those terms are defined in section 4(1) Cryptocurrency
3BA: A cryptocurrency is an excepted financial arrangement if the cryptocurrency does not meet the requirements of subsection (3BAB). Exception: cryptocurrency producing specified returns on purchase price
3BAB: A cryptocurrency is not an excepted financial arrangement if a consequence of ownership of the cryptocurrency is that the owner receives or is entitled to receive, during the period of ownership, amounts that are determined—
a: by reference to the quantity or value of the cryptocurrency; and
b: on a basis that is known by the owner in advance; and
c: not by reference to the profits of a business activity. Emissions unit
3B: An emissions unit is an excepted financial arrangement. Greenhouse gas unit
3C: A greenhouse gas unit that is not an emissions unit is an excepted financial arrangement. Research and development agreement
3D: An agreement between a person and another person (the provider research and development growth grant 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 to the extent to which it is not life financial reinsurance 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. Look-through companies
11B: A look-through interest for a look-through company is an excepted financial arrangement. Assignment and return of emissions units as part of loan
11C: An arrangement for the assignment of a pre-1990 forest land emissions unit by the holder to a person who is not an associated person (the lender section EW 52B Share-lending arrangement
12: A share-lending arrangement is an excepted financial arrangement. Share or option
13: 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. Option over cryptocurrency
13B: An option to acquire or to dispose of cryptocurrency is an excepted financial arrangement. Specified preference share
14: A specified preference share to which section FZ 1 Superannuation
15: A membership of a superannuation scheme is an excepted financial arrangement. Warranty
16: A warranty for goods or services is an excepted financial arrangement. Certain arrangements to which transitional resident is party
17: 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
18: 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
19: 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
20: 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
21: 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 sale and purchase
22: A short-term agreement for sale and purchase is an excepted financial arrangement, except for a party who makes an election under section EW 8 Short-term option
23: A short-term option is an excepted financial arrangement, except for a party who makes an election under section EW 8 Travellers’ cheques
24: Travellers’ cheques are excepted financial arrangements, except for a party who makes an election under section EW 8 Variable principal debt instrument
25: 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 emissions unit excepted financial arrangement farm-out arrangement finance lease greenhouse gas unit group investment fund hire purchase agreement income year insurance contract lease life financial reinsurance look-through company look-through interest New Zealand New Zealand resident non-resident pay property public authority share share-lending arrangement short-term agreement for sale and purchase short-term option superannuation scheme transitional resident variable principal debt instrument withdrawable share 2004 No 35 s EW 5 Section EW 5(2) amended 1 July 2010 section 132(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 5(3)(a) amended 1 August 2020 section 129 Racing Industry Act 2020 Section EW 5(3)(b) amended 1 August 2020 section 129 Racing Industry Act 2020 Section EW 5(3BA) heading inserted 30 March 2022 section 96(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 5(3BA) inserted 30 March 2022 section 96(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 5(3BAB) heading inserted 30 March 2022 section 96(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 5(3BAB) inserted 30 March 2022 section 96(1) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 5(3B) heading substituted 6 October 2009 section 132(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 5(3B) substituted 6 October 2009 section 132(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 5(3C) heading replaced 30 November 2020 section 280 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section EW 5(3C) replaced 30 November 2020 section 280 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section EW 5(3D) heading inserted 21 December 2010 section 56(1) Taxation (GST and Remedial Matters) Act 2010 Section EW 5(3D) inserted 21 December 2010 section 56(1) Taxation (GST and Remedial Matters) Act 2010 Section EW 5(3D) amended 30 March 2017 section 70 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EW 5(8) amended 1 July 2010 section 132(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 5(11B) heading inserted 1 April 2011 section 56(2) Taxation (GST and Remedial Matters) Act 2010 Section EW 5(11B) inserted 1 April 2011 section 56(2) Taxation (GST and Remedial Matters) Act 2010 Section EW 5(11C) heading inserted 26 June 2019 section 63(1) section 63(2) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EW 5(11C) inserted 26 June 2019 section 63(1) section 63(2) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EW 5(13B) heading inserted 30 March 2022 section 96(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 5(13B) inserted 30 March 2022 section 96(2) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 5 list of defined terms emissions unit inserted 6 October 2009 section 132(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 5 list of defined terms ETS unit repealed 6 October 2009 section 132(4)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 5 list of defined terms greenhouse gas unit inserted 30 November 2020 section 280 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section EW 5 list of defined terms life financial reinsurance inserted 1 July 2010 section 132(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 5 list of defined terms look-through company inserted 1 April 2011 section 56(4) Taxation (GST and Remedial Matters) Act 2010 Section EW 5 list of defined terms look-through interest inserted 1 April 2011 section 56(4) Taxation (GST and Remedial Matters) Act 2010 Section EW 5 list of defined terms non-Kyoto greenhouse gas unit repealed 30 November 2020 section 280 Climate Change Response (Emissions Trading Reform) Amendment Act 2020 Section EW 5 list of defined terms public authority inserted 21 December 2010 section 56(3) Taxation (GST and Remedial Matters) Act 2010
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 (16) Income or expenditure under remaining excepted financial arrangements
3: If an excepted financial arrangement described in any of section EW 5(17) to (25) Binding rulings
4: The Commissioner may make a binding ruling under section 91CC(1)(a) amount binding ruling excepted financial arrangement financial arrangement financial arrangements rules income 2004 No 35 s EW 6 Section EW 6(4) heading inserted 18 March 2019 section 175(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 6(4) inserted 18 March 2019 section 175(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 6 list of defined terms binding ruling inserted 18 March 2019 section 175(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
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(18) to (20) 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 2004 No 35 s EW 7
EW 8: Election to treat certain excepted financial arrangements as financial arrangements
Election
1: A person may choose to treat as financial arrangements—
a: all the excepted financial arrangements to which the person is a party that are described in any of section EW 5(21) to (25)
b: any excepted financial arrangement to which the person is a party that is described in section EW 5(10) Election for class of short-term agreements
2: A person may choose to treat as financial arrangements a class of short-term agreements for sale and purchase if the expenditure under the agreements satisfies the general permission and is not denied by a general limitation as a deduction for the person. The person must identify the class by—
a: the currency that applies to the agreements:
b: the term of the agreements. How election made
3: The person makes an election by returning income derived or expenditure incurred under the chosen 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 excepted Commissioner excepted financial arrangement financial arrangement financial arrangements rules income income year notice return of income short-term agreement for sale and purchase 2004 No 35 s EW 8 Section EW 8 heading replaced 30 June 2014 section 75(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 8(1) heading replaced 30 June 2014 section 75(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 8(1) heading replaced 30 June 2014 section 75(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 8(1) replaced 30 March 2017 section 71(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EW 8(2) heading replaced 30 June 2014 section 75(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 8(2) heading replaced 30 June 2014 section 75(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 8(2) replaced 30 June 2014 section 75(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 8(2) replaced 30 June 2014 section 75(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 8(3) amended 30 June 2014 section 75(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 8(5) amended 17 July 2013 section 50(4) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 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 Non-residents
2: Subsection (1) does not apply to a person who is not resident in New Zealand unless the person is described in subsection (3) or (4). 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 person as trustee—
i: meets the requirements of section HC 25(2)(a)
ii: meets the requirements of neither of the exceptions, to section HC 25(2) financial arrangement financial arrangements rules fixed establishment income New Zealand resident in New Zealand settlor trustee 2004 No 35 s EW 9 Section EW 9(2) replaced 24 February 2016 section 131(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 9(4)(b) replaced 24 February 2016 section 131(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 9 list of defined terms settlor inserted 24 February 2016 section 243 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
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 on or after 20 May 1999. 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 on or after 20 May 1999. financial arrangement financial arrangements rules relationship agreement 2004 No 35 s EW 10
EW 11: What financial arrangements rules do not apply to
The financial arrangements rules do not apply to—
a: the calculation of resident passive income:
b: the calculation of non-resident passive income, other than—
i: non-resident financial arrangement income; or
ii: income derived under a notional loan under section FG 3
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 financial arrangement income non-resident passive income pay resident passive income 2004 No 35 s EW 11 Section EW 11(b) replaced 30 March 2017 section 72(1) section 5 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EW 11 list of defined terms non-resident financial arrangement income inserted 30 March 2017 section 72(2) section 5 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 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 2004 No 35 s EW 12
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 Compensation Act 2001 Accident Insurance Act 1998 section 13 of the Accident Insurance Act 1998 Workers' Compensation Act 1956 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 pay spreading method trustee 2004 No 35 s EW 13 Section EW 13(2) substituted 1 April 2009 section 6(1) Taxation (Business Tax Measures) Act 2009 Section EW 13(2) amended 29 March 2018 section 77 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 13(2) amended 21 December 2010 section 189 Taxation (GST and Remedial Matters) Act 2010
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
aa: a method for IFRS, to which sections EW 15B to EW 15I
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. Binding rulings
4: The Commissioner may make a binding ruling under section 91CC(1)(b) sections EW 15E EW 15I amount binding ruling financial arrangement income income year spreading method 2004 No 35 s EW 14 Section EW 14(2)(aa) inserted 1 April 2008 section 364(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 14(2)(e) substituted 6 October 2009 section 133 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 14(4) heading inserted 18 March 2019 section 176(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 14(4) inserted 18 March 2019 section 176(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 14 list of defined terms binding ruling inserted 18 March 2019 section 176(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
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 financial reporting method in section EW 15D
ii: non-integral fees, if the relevant method is the IFRS financial reporting method in section EW 15D or the modified fair value method in section EW 15G
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 financial reporting method in section EW 15D
ii: non-integral fees, if the relevant method is the IFRS financial reporting method in section EW 15D or the modified fair value method in section EW 15G
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 48 amount consideration financial arrangement IFRS income non-contingent fee non-integral fee pay spreading method 2004 No 35 s EW 15 Section EW 15(1)(a) amended 1 April 2008 section 365(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15(1)(a)(i) inserted 1 April 2008 section 365(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15(1)(a)(ii) amended 29 August 2011 section 31(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 15(1)(b) amended 1 April 2008 section 365(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15(1)(b)(i) inserted 1 April 2008 section 365(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15(1)(b)(ii) amended 29 August 2011 section 31(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 15 list of defined terms IFRS inserted 1 April 2008 section 365(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15 list of defined terms non-integral fee inserted 1 April 2008 section 365(3) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 15B: Applying IFRSs to financial arrangements
When sections EW 15C to EW 15I apply
1: Sections EW 15C to EW 15I Certain methods available for use and certain mandatory
2: Sections EW 15C to EW 15I
a: the methods available to the person to use for calculating and allocating income and expenditure under a financial arrangement:
b: the circumstances in which a person must use certain other methods. Functional currency
3: Even if another currency may be used as the functional currency under IFRSs, the methods must be applied using New Zealand dollars. Financial statements
4: Unless the context otherwise requires, references to IFRSs in sections EW 15D to EW 15I Agreed spreading methods for life financial reinsurance
5: A life insurer who, in an income year, is a party to a life financial reinsurance contract (the reinsurance contract section 6A Deed of settlement requirements
6: The deed of settlement must—
a: be entered into by the life insurer and the Commissioner before 1 January 2023; and
b: require the life insurer to use for the income year a method (the agreed spreading method Commissioner expenditure financial arrangement financial statements IFRS income income year life financial reinsurance life insurer reinsurance contract 2004 No 35 s EW 15B Section EW 15B inserted 1 April 2008 section 366 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15B(3) heading added 6 October 2009 section 134 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15B(3) added 6 October 2009 section 134 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15B(4) heading added 6 October 2009 section 134 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15B(4) added 6 October 2009 section 134 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15B(5) heading inserted 31 March 2023 section 53(1) section 53(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15B(5) inserted 31 March 2023 section 53(1) section 53(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15B(6) heading inserted 31 March 2023 section 53(1) section 53(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15B(6) inserted 31 March 2023 section 53(1) section 53(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15B list of defined terms Commissioner inserted 31 March 2023 section 53(2) section 53(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15B list of defined terms expenditure inserted 31 March 2023 section 53(2) section 53(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15B list of defined terms income year inserted 31 March 2023 section 53(2) section 53(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15B list of defined terms life financial reinsurance inserted 31 March 2023 section 53(2) section 53(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15B list of defined terms life insurer inserted 31 March 2023 section 53(2) section 53(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15B list of defined terms reinsurance contract inserted 31 March 2023 section 53(2) section 53(3) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023
EW 15C: Preparing and reporting methods
Who this section applies to
1: A person who uses IFRSs to prepare financial statements and to report for financial arrangements must use 1 of the following methods for the financial arrangement:
a: the IFRS financial reporting method in section EW 15D
b: a determination alternative in section EW 15E
c: the expected value method in section EW 15F
d: the modified fair value method in section EW 15G Exclusions
2: Subsection (1) does not apply in the circumstances set out in sections EW 15H EW 15I fair value method financial arrangement financial statements IFRS 2004 No 35 s EW 15B(6) Section EW 15C inserted 1 April 2008 section 366 Taxation (Business Taxation and Remedial Matters) Act 2007
EW 15D: IFRS financial reporting method
General IFRS rules
1: Under the IFRS financial reporting method, a person must allocate an amount to an income year under IFRS rules modified, as applicable, under subsection (2). Modifications
2: The allocation is modified as follows:
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:
ac: if the financial arrangement is an interest-free loan, no amount is allocated to equity, equity reserves, other comprehensive income, or profit or loss
ad: if the financial arrangement is a loan with a fair value (the loan initial value consideration initial value to equity, equity reserves, other comprehensive income, or profit or loss
ae: if the financial arrangement is a foreign ASAP, or is an IFRS designated FX hedge for a foreign ASAP, sections EW 32 EW 33B
b: even though an amount may be allocated to equity, equity reserves, or other comprehensive income 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 not the IFRS financial reporting method. Meaning of impaired credit adjustment
3: For the purposes of 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 under the fair value method, credit impairment adjustments made under IFRSs. amount derivative instrument fair value method foreign ASAP FX hedge IFRS impaired credit adjustment income year NZIAS 23 tax 2004 No 35 s EW 15C Section EW 15D inserted 1 April 2008 section 366 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15D(2)(a) amended 6 October 2009 section 135(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15D(2)(ab) inserted 6 October 2009 section 135(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15D(2)(ac) inserted 1 April 2014 section 51(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section EW 15D(2)(ac) amended 24 February 2016 section 132(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 15D(2)(ad) inserted 1 April 2014 section 51(1) Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section EW 15D(2)(ad) amended 24 February 2016 section 132(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 15D(2)(ae) inserted first income year 30 June 2014 section 76(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15D(2)(b) amended 24 February 2016 section 132(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 15D(2B) heading inserted 6 October 2009 section 135(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15D(2B) inserted 6 October 2009 section 135(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15D(2B)(b) replaced first income year 30 June 2014 section 76(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15D(3)(a) replaced 31 March 2023 section 54 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15D list of defined terms derivative instrument inserted 6 October 2009 section 135(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15D list of defined terms foreign ASAP inserted first income year 30 June 2014 section 76(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15D list of defined terms FX hedge inserted first income year 30 June 2014 section 76(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15D list of defined terms NZIAS 23 inserted 6 October 2009 section 135(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EW 15E: Determination alternatives
When this section applies
1: This section applies when—
a: a person chooses in a return of income to use a determination alternative to IFRS for a financial arrangement; and
b: the method is available under its terms for the person to use; 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. General IFRS rules
2: The person must use 1 of the following methods modified, as applicable, under subsection (3) or (3B):
aa: Determination G3: Yield to maturity Determination G3 Determination G25: Variation in the terms of a financial arrangement
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) section 91CC(1)(b)
e: a method other than those set out in paragraphs (aa) to (d)
i: has regard to the purposes of the financial arrangements rules under section EW 1(3)
ii: is for a financial arrangement similar to 1 to which the methods set out in paragraphs (aa) to (d)
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 the methods set out in paragraphs (aa) to (d) Modifications
3: For a determination alternative that is Determination G9C or G14B
a: the term forward contract
b: a requirement that all companies in a group of companies to which the person belongs choose to use the determination alternative is treated as met if—
i: all companies in the group notify the Commissioner that they choose Determination G9C or G14B
ii: the financial arrangement is the first financial arrangement of the group for which Determination G9C or G14B Modifications
3B: For a determination alternative that is Determination G27
a: method C must be used, and not methods A, B, or D:
b: for method C, if relevant, Determination G9C Determination G9A Succeeding determinations
4: For the purposes of this section, the determinations set out in subsection (2)(a) to (c) include a determination that succeeds the determination. amount binding ruling Commissioner company derivative instrument financial arrangement financial arrangements rules group of companies IFRS income year New Zealand notify pay return of income 2004 No 35 s EW 15D Section EW 15E inserted 1 April 2008 section 366 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15E(1)(c) substituted 6 October 2009 section 136(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E(1)(c)(ii) amended 7 September 2010 section 36 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 15E(1)(c)(iii) added 7 September 2010 section 36 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 15E(2) amended 6 October 2009 section 136(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E(2)(aa) inserted 6 October 2009 section 136(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E(2)(d) replaced 18 March 2019 section 177(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 15E(2)(e) amended 7 December 2009 section 19(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EW 15E(2)(e)(ii) amended 7 December 2009 section 19(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EW 15E(2)(e)(iii) amended 7 December 2009 section 19(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EW 15E(3)(b)(i) replaced 2 June 2016 section 35(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EW 15E(3B) heading inserted 6 October 2009 section 136(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E(3B) inserted 6 October 2009 section 136(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E list of defined terms binding ruling inserted 18 March 2019 section 177(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 15E list of defined terms Commissioner inserted 2 June 2016 section 35(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EW 15E list of defined terms derivative instrument inserted 6 October 2009 section 136(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E list of defined terms New Zealand inserted 6 October 2009 section 136(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E list of defined terms notify inserted 2 June 2016 section 35(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EW 15F: Expected value method
When this section applies
1: This section applies when—
a: a person has entered into a financial arrangement in the ordinary course of their business and the person is not in the business of dealing in relation to the financial arrangement; and
b: the financial arrangement is denominated in a currency other than New Zealand dollars or is a derivative instrument; and
bb: the financial arrangement is not a foreign ASAP; 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 and all companies in a group of companies to which the person belongs have chosen to use the expected value method and have notified the Commissioner at the time of filing a return of income. Exception for some group members and financial arrangements
1B: A person who is a member of a group of companies and has notified an election under subsection (1)(d) is not required under this section to use the expected value method for a financial arrangement if—
a: the person does not have a business of a substantially similar nature to a business of another company in the group; and
b: the financial arrangement is with other parties, of which—
i: none are associated with the person or a member of the group; or
ii: all are associated with the person and use the method used by the person for the arrangement. Method chosen
2: The person must use a method that—
a: has the features of an expected value approach described in Determinations G9C and G14B
b: allocates a reasonable amount for each income year of the term of the financial arrangement, having regard to the purposes of the financial arrangements rules under section EW 1(3) Meaning of derivative instrument
3: amount associated person business Commissioner company derivative instrument financial arrangement financial arrangements rules foreign ASAP group of companies IFRS notify return of income 2004 No 35 s EW 15E(1), (2) Section EW 15F inserted 1 April 2008 section 366 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15F(1)(bb) inserted first income year 30 June 2014 section 77(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15F(1)(c) substituted 6 October 2009 section 137(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15F(1)(c)(ii) amended 7 September 2010 section 37 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 15F(1)(c)(iii) added 7 September 2010 section 37 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 15F(1)(d) substituted 6 October 2009 section 137(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15F(1B) heading inserted 6 October 2009 section 137(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15F(1B) inserted 6 October 2009 section 137(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15F(3) heading repealed 6 October 2009 section 137(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15F(3) repealed 6 October 2009 section 137(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15F list of defined terms associated person inserted 6 October 2009 section 137(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15F list of defined terms foreign ASAP inserted first income year 30 June 2014 section 77(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15F list of defined terms NZIAS 39 repealed 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019
EW 15G: Modified fair value method
When this section applies
1: This section applies when—
a: a person has entered into a financial arrangement in the ordinary course of their business and the person is not in the business of dealing in relation to the financial arrangement; and
b: the financial arrangement is denominated in a currency other than New Zealand dollars or is a derivative instrument; and
bb: the financial arrangement is not a foreign ASAP; 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 and all companies in a group of companies to which the person belongs have chosen to use the modified fair value method and have notified the Commissioner at the time of filing a return of income. Exception for some group members and financial arrangements
1B: A person who is a member of a group of companies and has notified an election under subsection (1)(d) is not required under this section to use the modified fair value method for a financial arrangement if—
a: the person does not have a business of a substantially similar nature to a business of another company in the group; and
b: the financial arrangement is with other parties, of which—
i: none are associated with the person or a member of the group; or
ii: all are associated with the person and use the method used by the person for the arrangement; and
c: subsection (3) does not require the person to use the modified fair value for the financial arrangement. Method chosen
2: The person must use the fair value method, modified so that the following are not required to be allocated to an income year:
a: an amount allocated by the person to equity, equity reserves, or other comprehensive income
b: an amount not allocated by the person to equity, equity reserves, or other comprehensive income
i: the person and another person (the other person
ii: the person and the other person are members of the same group consolidated under IFRSs; and
iii: the financial arrangement is related to an arrangement (the other arrangement
iv: the other person does not use the fair value method for the other arrangement; and
v: the group consolidated under IFRSs makes an allocation, to equity, equity reserves, or other comprehensive income Some financial arrangements with amounts allocated to equity reserves
3: A person who is a member of a wholly-owned group and of a group consolidated under IFRSs (the consolidated group
a: the person or the consolidated group allocates an amount to equity, equity reserves, or other comprehensive income
b: a member of the consolidated group, under subsection (2)(b), does not allocate to the income year an amount for a financial arrangement. amount business Commissioner company derivative instrument fair value method financial arrangement foreign ASAP group of companies IFRS notify return of income wholly-owned group 2004 No 35 s EW 15E(1), (3) Section EW 15G inserted 1 April 2008 section 366 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15G(1)(bb) inserted first income year 30 June 2014 section 78(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15G(1)(c) substituted 6 October 2009 section 138(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15G(1)(c)(ii) amended 7 September 2010 section 38 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 15G(1)(c)(iii) added 7 September 2010 section 38 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 15G(1)(d) substituted 6 October 2009 section 138(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15G(1B) heading inserted 6 October 2009 section 138(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15G(1B) inserted 6 October 2009 section 138(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15G(2) substituted 6 October 2009 section 138(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15G(2)(a) amended 24 February 2016 section 133(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 15G(2)(b) amended 24 February 2016 section 133(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 15G(2)(b)(v) amended 24 February 2016 section 133(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 15G(3) heading added 6 October 2009 section 138(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15G(3) added 6 October 2009 section 138(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15G(3)(a) amended 24 February 2016 section 133(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 15G list of defined terms foreign ASAP inserted first income year 30 June 2014 section 78(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15G list of defined terms wholly-owned group added 6 October 2009 section 138(6) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EW 15H: Mandatory use of some determinations
Required methods
1: Section EW 15C(1)
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:
e: a method other than those set out in paragraphs (a) to (c)
i: has regard to the purposes of the financial arrangements rules under section EW 1(3)
ii: is for a financial arrangement similar to 1 to which the methods set out in paragraphs (a) to (c)
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 the methods set out in paragraphs (a) to (c) Succeeding determinations
2: For the purposes of this section, the determinations set out in subsection (1)(a) and (c) amount financial arrangement financial arrangements rules income year 2004 No 35 s EW 15B(3) Section EW 15H inserted 1 April 2008 section 366 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15H(1)(d) repealed first income year 30 June 2014 section 79(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15H(1)(e) amended 29 March 2018 section 78(1) section 78(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 15H(1)(e)(ii) amended 29 March 2018 section 78(1) section 78(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 15H(1)(e)(iii) amended 29 March 2018 section 78(1) section 78(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 15H(2) amended 29 March 2018 section 78(2) section 78(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
EW 15I: Mandatory use of yield to maturity method for some arrangements
When this section applies
1: This section applies and section EW 15C(1)
a: a person is not required to use a method under section EW 15H
b: the financial arrangement—
i: includes in part an excepted financial arrangement; or
ii: is treated by the person or its issuer, all or in part, as an equity instrument under IFRSs; or
iib: is, under NZ IFRS 16
iii: is a foreign ASAP that is life financial reinsurance; or
iv: is an agreement for the sale and purchase of property or services that is not a foreign ASAP. Methods
2: The person must use 1 of the following methods to allocate an amount to an income year if the method is available under its terms for the person to use:
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) section 91CC(1)(b)
d: a method other than those set out in paragraphs (a) to (c) if the alternative—
i: has regard to the purposes of the financial arrangements rules under section EW 1(3)
ii: is for a financial arrangement similar to 1 to which the methods set out 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 the methods set out in paragraphs (a) to (c). Meaning of equity instrument
3: For the purposes of this section, equity instrument agreement for the sale and purchase of property or services amount binding ruling Commissioner equity instrument excepted financial arrangement financial arrangement financial arrangements rules foreign ASAP IFRS income year issue life financial reinsurance NZ IFRS 16 NZIAS 32 2004 No 35 s EW 15B(4) Section EW 15I inserted 1 April 2008 section 366 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15I(1)(b)(iib) inserted 6 October 2009 section 140(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15I(1)(b)(iib) amended 30 March 2021 section 49(1) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EW 15I(1)(b)(iii) replaced first income year 30 June 2014 section 80(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15I(1)(b)(iv) inserted first income year 30 June 2014 section 80(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15I(2)(c) replaced 18 March 2019 section 178(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 15I list of defined terms binding ruling inserted 18 March 2019 section 178(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 15I list of defined terms foreign ASAP inserted first income year 30 June 2014 section 80(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15I list of defined terms life financial reinsurance inserted first income year 30 June 2014 section 80(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 15I list of defined terms NZ IFRS 16 inserted 30 March 2021 section 49(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EW 15I list of defined terms NZIAS 17 repealed 30 March 2021 section 49(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EW 15I list of defined terms NZIAS 32 added 29 August 2011 section 140(1) Taxation (Tax Administration and Remedial Matters) Act 2011
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 a method under 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 a method under 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 income year 2004 No 35 s EW 16 Section EW 16(1) amended 1 April 2008 section 367(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 16(2) amended 1 April 2008 section 367(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 16 list of defined terms IFRS inserted 1 April 2008 section 367(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 $1,850,000
b: the person complies with section EW 25(1)
c: the person is not required to use a method under 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). Secondary legislation
4: An Order in Council under subsection (3) is secondary legislation ( see Part 3 amount financial arrangement financial arrangements rules fixed principal financial arrangement IFRS income year old financial arrangements rules variable principal debt instrument 2004 No 35 s EW 17 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EW 17(1)(a) amended 1 April 2009 section 7(1) Taxation (Business Tax Measures) Act 2009 Section EW 17(1)(b) amended 1 April 2008 section 368(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 17(1)(c) added 1 April 2008 section 368(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 17(4) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EW 17(4) inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EW 17 list of defined terms IFRS inserted 1 April 2008 section 368(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 a method under section EW 15B Application of Tax Administration Act 1994
2: Section 22A(1) associated person business Commissioner financial arrangement forward contract futures contract IFRS 2004 No 35 s EW 18 Section EW 18(1)(f) amended 1 April 2008 section 369(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 18(1)(g) added 1 April 2008 section 369(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 18 list of defined terms IFRS inserted 1 April 2008 section 369(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 19: Choice among
some A person who is not required to use a method under section EW 15B financial arrangement IFRS spreading method 2004 No 35 s EW 19 Section EW 19 heading amended 1 April 2008 section 370(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 19 amended 1 April 2008 section 370(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 19 list of defined terms IFRS inserted 1 April 2008 section 370(3) 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 a method under 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 a method under 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 2004 No 35 s EW 20 Section EW 20(1)(b)(ii) amended 1 April 2008 section 371(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 20(1)(c) added 1 April 2008 section 371(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 20(2)(bb) inserted 1 April 2008 section 371(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 20 list of defined terms IFRS inserted 1 April 2008 section 371(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 a method under 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 income year Section EW 21 substituted 6 October 2009 section 141 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
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 2004 No 35 s EW 22 Section EW 22(c) amended 6 October 2009 section 142 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 22(c) amended 1 April 2008 section 373(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 22(d) repealed 1 April 2008 section 373(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 is 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) IFRS financial reporting
4: This section is modified by section EZ 32B Commissioner financial arrangement financial arrangements rules IFRS income year notice tax avoidance 2004 No 35 s EW 23 Section EW 23(1) amended 6 October 2009 section 143(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 23(1) amended 1 April 2008 section 374(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 23(2) amended 6 October 2009 section 143(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 23(2) amended 1 April 2008 section 374(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 23(4) heading added 1 April 2008 section 374(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 23(4) added 1 April 2008 section 374(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 23 list of defined terms IFRS inserted 1 April 2008 section 374(3) 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 method
2B: Section EW 25B Change of spreading method
3: Sections EW 26 HM 35(8)(c) financial arrangement IFRS income year spreading method 2004 No 35 s EW 24 Section EW 24(2B) heading inserted 1 April 2008 section 375(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 24(2B) inserted 1 April 2008 section 375(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 24(3) amended 1 April 2023 section 55(1) section 55(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 24 list of defined terms IFRS inserted 1 April 2008 section 375(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 $1,850,000
3: Subsection (2) applies even if the total value of all the financial arrangements to which the person is a party is over $1,850,000 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 6(1) Increase in specified sum
5: The Governor-General may make an Order in Council under section EW 17(3) financial arrangement income year 2004 No 35 s EW 25 Section EW 25(3) heading amended 1 April 2009 section 8(1) Taxation (Business Tax Measures) Act 2009 Section EW 25(3) amended 1 April 2009 section 8(2) Taxation (Business Tax Measures) Act 2009
EW 25B: Consistency of use of IFRS method
Consistency
1: A person who uses a method for IFRS under section EW 15C
a: the remaining term of the arrangement until section EW 29
b: other financial arrangements that are the same as, or similar to, the arrangement unless a different accounting treatment under IFRSs is used. Exception
2: Despite subsection (1)(a), a person may change a method for IFRS if—
a: the new method is available to them to use; and
b: the accounting treatment for the financial arrangement under IFRSs is changed in the same income year in which the method is changed for tax purposes. Spreading method adjustment
3: For the purposes of subsection (2), section EW 26(3), (4) EW 27 However, those sections do not apply if the change—
a: is from the fair value method; and
b: relates to a financial arrangement that is not subject to a creditor workout. Modification
4: Section EZ 52B Determination G3 creditor workout fair value method financial arrangement IFRS income year 2004 No 35 s EW 25B Section EW 25B inserted 1 April 2008 section 376 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 25B(3) amended 7 December 2009 section 20 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EW 25B(3) amended 6 October 2009 section 144(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 25B(3)(a) substituted 7 December 2009 section 20 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EW 25B(3)(b) substituted 7 December 2009 section 20 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EW 25B(4) heading added 6 October 2009 section 144(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 25B(4) added 6 October 2009 section 144(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 25B list of defined terms creditor workout inserted 6 October 2009 section 144(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
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 a method for IFRS under section EW 15B the Commissioner has authorised the change and notified the person of the authorisation Change of other method
2: A person may change from any spreading method to any other method if the Commissioner's notification 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 for fair value method
6: Section EW 29(13)
a: from the fair value method and the financial arrangement is not subject to a creditor workout:
b: from the market value method to a method for IFRS under section EW 15B Meaning of sound commercial reason
7: In this section, sound commercial reason
a: starting or stopping the use of IFRSs to prepare financial statements at the same time as starting or stopping the use of a method for IFRS under section EW 15B
b: starting to use a method for IFRS under section EW 15B Modification
8: Section EZ 52C Determination G22 Determination G22A Commissioner creditor workout fair value method financial arrangement financial statements IFRS income income tax liability income year notify sound commercial reason spreading method 2004 No 35 s EW 26 Section EW 26(1) heading substituted 6 October 2009 section 145(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 26(1) substituted 6 October 2009 section 145(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 26(1) amended 2 June 2016 section 36(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EW 26(2) amended 2 June 2016 section 36(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EW 26(2) amended 6 October 2009 section 145(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 26(6) heading added 1 April 2008 section 377(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26(6) substituted 6 October 2009 section 145(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 26(7) heading added 1 April 2008 section 377(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26(7) added 1 April 2008 section 377(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26(7)(a) substituted 6 October 2009 section 145(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 26(8) heading added 26 September 2010 section 39 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 26(8) added 26 September 2010 section 39 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 26 list of defined terms creditor workout inserted 6 October 2009 section 145(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 26 list of defined terms fair value method inserted 1 April 2008 section 377(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26 list of defined terms financial statements inserted 1 April 2008 section 377(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26 list of defined terms IFRS inserted 1 April 2008 section 377(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26 list of defined terms notify inserted 2 June 2016 section 36(3) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EW 26 list of defined terms sound commercial reason inserted 1 April 2008 section 377(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) 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) Expenditure (new method)
6: Expenditure (new method) Income (old method)
7: Income (old method) section CC 3 Expenditure (old method)
8: Expenditure (old method) Modification
9: Section EZ 52C Determination G22 Determination G22A amount financial arrangement income income year spreading method 2004 No 35 s EW 27 Section EW 27(9) heading added 26 September 2010 section 40 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 27(9) added 26 September 2010 section 40 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 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 2004 No 35 s EW 28
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) and (2) 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. Disposal
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 disposes of section EW 43 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. Changing from fair value method
13: A party to a financial arrangement must calculate a base price adjustment, for the first income year for which a changed method is used for the financial arrangement, where the change in method is
a: from the fair value method and the financial arrangement is not subject to a creditor workout:
b: from the market value method to a method for IFRS under section EW 15B Cessation of LTCs and dissolution of partnerships
14: A person that is party to a financial arrangement in their capacity as owner or partner of a look-through company or a partnership must calculate a base price adjustment as at the date of disposal of the financial arrangement under section HB 4(3) or (6) HG 4 private capacity amount associated person business consideration creditor workout fair value method financial arrangement fixed establishment legal defeasance look-through company maturity New Zealand New Zealand resident partner partnership pay 2004 No 35 s EW 29 Section EW 29(8) heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 29(8) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 29(13) heading added 1 April 2008 section 378(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 29(13) amended 29 August 2011 section 33 Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 29(13) substituted 6 October 2009 section 146(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 29(14) heading inserted 29 March 2018 section 79(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 29(14) inserted 29 March 2018 section 79(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 29 list of defined terms creditor workout inserted 6 October 2009 section 146(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 29 list of defined terms fair value method inserted 1 April 2008 section 378(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 29 list of defined terms look-through company inserted 29 March 2018 section 79(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 29 list of defined terms partner inserted 29 March 2018 section 79(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 29 list of defined terms partnership inserted 29 March 2018 section 79(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
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 2004 No 35 s EW 30
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 (which relate to deductions for interest) or, if none of those sections applies, under section DB 11 (Negative base price adjustment) 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 For the purposes of this subsection, the following are ignored:
a: non-contingent fees, if the relevant method is not the IFRS financial reporting method in section EW 15D
b: non-integral fees, if the relevant method is—
i: the IFRS financial reporting method in section EW 15D
ii: the modified fair value method in section EW 15G Consideration in particular cases
8: If any of sections EW 32 to EW 48 , or EZ 52D Income
9: Income
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) and (3) Expenditure
10: Expenditure Amount remitted
11: Amount remitted
a: is an amount (a remission
i: by the person; or
ii: by law; but
b: does not include a remission that is self-remission. amount consideration deduction dividend fair value method financial arrangement IFRS income income year non-contingent fee non-integral fee pay self-remission 2004 No 35 s EW 31 Section EW 31(4) amended 29 August 2011 section 34(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 31(7) amended 29 August 2011 section 140(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 31(7) amended 6 October 2009 section 147(1)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 31(7) amended 6 October 2009 section 147(1)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 31(7) amended 1 April 2008 section 379(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 31(7)(a) substituted 29 August 2011 section 140(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 31(7)(b) replaced 29 March 2018 section 80(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 31(8) amended 26 September 2010 section 41 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 31(9)(a) amended 6 October 2009 section 147(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 31(11) replaced 30 March 2017 section 73(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EW 31 list of defined terms fair value method inserted 29 March 2018 section 80(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 31 list of defined terms IFRS inserted 1 April 2008 section 379(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 31 list of defined terms non-integral fee inserted 1 April 2008 section 379(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 31 list of defined terms self-remission inserted 30 March 2017 section 73(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Consideration Consideration when financial arrangement involves property or services
EW 32: Consideration for agreement for sale
and purchase (ASAP) When this section applies
1: This section applies when an original party to an agreement for the sale and purchase of property or services, a hire purchase agreement, a specified option, or a finance lease pays or is paid consideration that includes property or services. Value of property or services
2: The value of the property or services is determined by applying, as modified by sections EW 33B EW 33C EW 33D EW 34 IFRS foreign ASAPs
2B: If the person uses IFRSs to prepare financial statements or to report for financial arrangements, and the relevant financial arrangement is a foreign ASAP, the value of the property or services is the value under IFRS rules, modified on account of FX hedges as provided by section EW 33B Section EW 33D Future or discounted value: foreign ASAPs
2C: If the relevant financial arrangement is a foreign ASAP, the value of the property or services is the value of the amounts paid or payable under the foreign ASAP for the property or services, but ignoring amounts that are expressly provided in the agreement as paid or payable on account of the future value, or the discounted value, or a combination of both the future and discounted values, on the rights date, of amounts paid or payable. Section EW 33B sections EW 33C EW 33D Future or discounted value: foreign ASAPs subject to 12 month ASAP
2D: If the relevant financial arrangement is a foreign ASAP that is a 12 month ASAP, 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, on the rights date, of the amounts paid or payable under the 12 month ASAP for the property or services. Section EW 33B sections EW 33C EW 33D Express value: foreign ASAPs not subject to 12 month ASAP
2E: If the relevant financial arrangement is a foreign ASAP that is not a 12 month ASAP, the value of the property or services on the rights date Section EW 33B sections EW 33C EW 33D 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 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 or binding ruling under section 91CC(1)(c) Exclusion
7: This section does not apply if the agreement, option, or lease has lapsed or does not proceed. Relationship with subject matter
8: Sections EZ 75 EZ 76 12 month ASAP agreement for the sale and purchase of property or services amount apply binding ruling Commissioner consideration finance lease financial arrangement foreign ASAP FX hedge hire purchase agreement IFRS pay property right rights date specified option 2004 No 35 s EW 32 Section EW 32 heading amended first income year 30 June 2014 section 81(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(2) amended 18 March 2019 section 179(1) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 32(2) amended first income year 30 June 2014 section 81(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(2B) heading inserted first income year 30 June 2014 section 81(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(2B) inserted 30 June 2014 section 81(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(2B) amended 18 March 2019 section 179(2) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 32(2C) heading inserted first income year 30 June 2014 section 81(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(2C) inserted first income year 30 June 2014 section 81(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(2C) amended 18 March 2019 section 179(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 32(2D) heading inserted first income year 30 June 2014 section 81(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(2D) inserted first income year 30 June 2014 section 81(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(2D) amended 18 March 2019 section 179(4) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 32(2E) heading inserted first income year 30 June 2014 section 81(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(2E) inserted first income year 30 June 2014 section 81(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(2E) amended 18 March 2019 section 179(5) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 32(2E) amended 18 March 2019 section 179(6) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 32(6) amended 18 March 2019 section 179(7) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 32(8) heading inserted 30 June 2014 section 81(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32(8) inserted 30 June 2014 section 81(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32 list of defined terms 12 month ASAP inserted first income year 30 June 2014 section 81(5) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32 list of defined terms apply inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EW 32 list of defined terms binding ruling inserted 18 March 2019 section 179(8) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 32 list of defined terms foreign ASAP inserted first income year 30 June 2014 section 81(5) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32 list of defined terms FX hedge inserted first income year 30 June 2014 section 81(5) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32 list of defined terms IFRS inserted first income year 30 June 2014 section 81(5) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 32 list of defined terms rights date inserted first income year 30 June 2014 section 81(5) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
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 pay personal property lease asset lessor 2004 No 35 s EW 33
EW 33B: Foreign ASAPs: designated FX hedges
When this section applies
1: This section applies when, for a person's financial arrangement, section EW 32(2B)
a: the financial arrangement is a foreign ASAP that relates to:
i: property that is or will be depreciable property or revenue account property; or
ii: services, the sale or purchase of which, as relevant for the person, gives rise to assessable income or deductions under this Act outside of the financial arrangements rules; and
b: the person holds an IFRS designated FX hedge in relation to the financial arrangement. When this section applies
2: This section applies when, for a person's financial arrangement, section EW 32(2C), (2D), or (2E)
a: the financial arrangement is a foreign ASAP that relates to:
i: property that is or will be depreciable property or revenue account property; or
ii: services, the sale or purchase of which, as relevant for the person, gives rise to assessable income or deductions under this Act outside of the financial arrangements rules; and
b: the person notifies the Commissioner that they have made an irrevocable election to apply this section to all financial arrangements for property and services described in paragraph (a)(i) and (ii), at the time of—
i: filing a return of income for the income year in which they enter into the financial arrangement; or
ii: filing a return of income for an earlier income year; and
c: the person holds a non-IFRS designated FX hedge in relation to the financial arrangement. Value: IFRS
3: For a financial arrangement described in subsection (1) the value under section EW 32 Value: non-IFRS
4: For a financial arrangement described in subsection (2) the value under section EW 32 FX hedge amounts attributed to value: No double-counting, no separate spreading or base price adjustment
5: When applying a spreading method to, or calculating a base price adjustment for, amounts under an IFRS designated FX hedge or a non-IFRS designated FX hedge, to the extent to which an amount is attributed to the value of the property or services under this section, that amount is excluded from the spreading method or base price adjustment. Relationship with subject matter
6: Sections EZ 75 EZ 76 Commissioner depreciable property financial arrangement foreign ASAP IFRS IFRS designated FX hedge non-IFRS designated FX hedge notify revenue account property spreading method Section EW 33B inserted first income year 30 June 2014 section 82(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 33B(2)(b) replaced 2 June 2016 section 37(1) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EW 33B list of defined terms Commissioner inserted 2 June 2016 section 37(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Section EW 33B list of defined terms notify inserted 2 June 2016 section 37(2) Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
EW 33C: Consideration in foreign currency: some agreements for sale and purchase
When this section applies
1: This section applies when the consideration paid or payable under a financial arrangement to which section EW 32(2C), (2D), or (2E) Spot rates
2: The spot rate on the date an amount of consideration is paid or payable is used to convert to New Zealand dollars for consideration in a foreign currency. Spot rates unavailable
3: If no spot rate is available for an amount under the financial arrangement, because the amount is deferred into an income year after a person's current income year and that deferral is for a day after the person is required to file a return of income for the current income year, then the person may use for the amount—
a: the spot rate at the end of the current income year; or
b: the spot rate on the date an amount of consideration is paid or payable, if it is paid or payable within 93 days of the end of the current income year. amount consideration financial arrangement income year New Zealand person return of income Section EW 33C inserted first income year 30 June 2014 section 82(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 33C(3) heading inserted 24 February 2016 section 134 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EW 33D: Foreign ASAPs: contingencies for business combinations
Assets and liabilities
1: For a foreign ASAP, in relation to the sale and purchase of a business combination by way of sale and purchase of the combination’s assets and liabilities, an amount of contingent consideration under the ASAP is credited or debited, as applicable, against goodwill to the extent to which—
a: section EW 32(2B)
b: section EW 32(2B)
c: section EW 32(2C), (2D), or (2E)
d: section EW 32(2C), (2D), or (2E) Shares
2: For a foreign ASAP, in relation to the sale and purchase of a business combination by way of sale and purchase of the combination’s shares, an amount of contingent consideration under the ASAP is credited or debited, as applicable, against the shares if—
a: section EW 32(2B)
b: section EW 32(2B)
c: section EW 32(2C), (2D), or (2E)
d: section EW 32(2C), (2D), or (2E) amount foreign ASAP share Section EW 33D inserted 18 March 2019 section 180 Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019
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 pay property registered bank right year 2004 No 35 s EW 34
EW 35: Value relevant for non-financial arrangements rule
When this section applies
1: This section applies when the value of property or services Value
2: The person is treated as having acquired or disposed of the property or services section EW 32(2) consideration deduction financial arrangement financial arrangements rules income property 2004 No 35 s EW 35 Section EW 35(1) amended 30 June 2014 section 83(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EW 35(2) amended 30 June 2014 section 83(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 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: 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
ii: 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
iii: 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(18) to (20)
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 pay resident in New Zealand 2004 No 35 s EW 36
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:
ab: the person is a non-resident who—
i: becomes a party to the arrangement after 1 April 2008; and
ii: becomes a transitional resident after becoming a party to the arrangement; and
iii: must calculate and allocate income or expenditure under the arrangement for an income year under the financial arrangements rules:
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(17)
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(17)
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(18) to (20) 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 financial arrangements rules fixed establishment New Zealand New Zealand resident non-resident pay transitional resident 2004 No 35 s EW 37 Section EW 37(1)(ab) inserted 28 March 2024 section 63(1) section 63(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EW 37 list of defined terms financial arrangements rules inserted 28 March 2024 section 63(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
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 pay 2004 No 35 s EW 38
EW 39: 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). Consideration is market value: self remission
4: accrued entitlement associated person business consideration financial arrangement pay 2004 No 35 s EW 40 Section EW 39(4) heading repealed 29 March 2018 section 81(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 39(4) repealed 29 March 2018 section 81(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EW 39 list of defined terms self-remission repealed 29 March 2018 section 81(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Consideration treated as paid by person
EW 40: 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: 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
ii: 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
iii: 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(18) to (20)
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 pay resident in New Zealand 2004 No 35 s EW 41
EW 41: 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:
ab: the person is a non-resident who—
i: becomes a party to the arrangement after 1 April 2008; and
ii: becomes a transitional resident after becoming a party to the arrangement; and
iii: must calculate and allocate income or expenditure under the arrangement for an income year under the financial arrangements rules:
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(17)
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(17)
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(18) to (20) 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 financial arrangements rules fixed establishment New Zealand New Zealand resident non-resident pay transitional resident 2004 No 35 s EW 42 Section EW 41(1)(ab) inserted 28 March 2024 section 64(1) section 64(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EW 41 list of defined terms financial arrangements rules inserted 28 March 2024 section 64(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
EW 42: 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 pay 2004 No 35 s EW 43
EW 43: Consideration when debt
disposed of When this section applies
1: This section applies when a creditor disposes of At a discount
2: A creditor disposes of disposes of Market value
3: 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
4: 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 pay 2004 No 35 s EW 45 Section EW 43 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 43(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 43(1) amended 1 April 2010 section 21 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EW 43(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 43 list of defined terms 1988 version provisions repealed 1 April 2010 section 594 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EW 44: 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 41 CW 42
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 pay 2004 No 35 s EW 46
EW 45: 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); or
iv: the terms of a loan under the small business cashflow scheme under section 7AA 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. Secondary legislation
3B: An Order in Council under subsection (3) is secondary legislation ( see Part 3 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 pay small business cashflow scheme 2004 No 35 s EW 47 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EW 45(1)(b)(iii) amended 30 April 2020 section 6(1) COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 Section EW 45(1)(b)(iv) inserted 30 April 2020 section 6(1) COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 Section EW 45(3B) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EW 45(3B) inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EW 45 list of defined terms small business cashflow scheme inserted 30 April 2020 section 6(2) COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020
EW 46: Consideration when debtor released as condition of new start grant
Section EW 46 repealed 24 February 2016 section 135 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EW 46B: Consideration when party changes from fair value method
When this section applies
1: This section applies when a party to a financial arrangement—
a: changes from the fair value method to another method; and
b: is required under section EW 29(13) at the end of the first income year for which the replacement method is used for the financial arrangement Consideration
2: The person is treated as having been paid an amount equal to the market value of the financial arrangement at the end of the first income year for which the replacement method is used for the financial arrangement amount fair value method financial arrangement 2004 No 35 s EW 48B Section EW 46B inserted 1 April 2008 section 380 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 46B(1)(b) amended 29 August 2011 section 35(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 46B(2) amended 29 August 2011 section 35(2) Taxation (Tax Administration and Remedial Matters) Act 2011
EW 46C: Consideration when debt
remitted When this section applies
1: This section applies to the extent to which an amount of debt is remitted
a: the creditor is a member of the same wholly-owned group of companies as the debtor and—
i: the debtor is a New Zealand resident company:
ii: the debtor carries on a business in New Zealand through a fixed establishment in New Zealand and the creditor or an associated person cannot deduct, under this Act or a taxation law of a country or territory outside New Zealand, an amount in relation to the remission against income:
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 YC 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 remitted
ab: the debt includes an amount accrued and unpaid at the time of the remission
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 of the trust’s debt that is remitted for the debtor the amount of the single creditor group’s debt that is remitted for the debtor for example remitted remitted
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 it is remitted
a: if the relevant debt
b: to the extent to which the proportional debt ratio Consideration: creditor
5: Unless subsection (5C) applies, the creditor it is remitted
a: if the relevant debt
b: to the extent to which the proportional debt ratio When subsection (5C) applies
5B: Subsection (5C) applies when—
a: the relevant debt, creditor, and debtor are described in subsection (1)(a) or (b); and
b: the creditor is a person to which section EW 41 Consideration: special case
5C: The creditor is treated as having been paid, on the date on which the amount of debt is remitted, the lesser of the following 2 amounts, or the first amount if they are the same:
a: the amount of debt:
b: the amount calculated by subtracting, from the amount of debt, any impairment of the relevant debt under generally accepted accounting practice at the time the creditor is treated under section EW 41(2) Some definitions
6: For the purposes of this section,— nominal shares an exempt ESS proportional debt ratio remitted remitted proportional ownership ratio amount consideration employee exempt ESS generally accepted accounting practice group of persons income look-through company look-through interest market value interest New Zealand resident nominal share non-resident partnership partner’s interests pay proportional debt ratio proportional ownership ratio share trustee voting interest wholly-owned group of companies Section EW 46C inserted 30 March 2017 section 75(1) section 75(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EW 46C heading amended 30 March 2022 section 97(1) section 97(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C(1) amended 30 March 2022 section 97(2) section 97(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C(1)(a) replaced 30 March 2022 section 97(3) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C(2)(a) amended 30 March 2022 section 97(4) section 97(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C(2)(ab) inserted 1 July 2017 section 76 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EW 46C(2)(ab) amended 30 March 2022 section 97(5) section 97(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C(2)(b)(ii) amended 30 March 2022 section 97(6) section 97(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C(2)(b)(ii) amended 30 March 2022 section 97(7) section 97(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C(2)(b)(ii) amended 30 March 2022 section 97(8) section 97(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C(4) amended 30 March 2022 section 97(9) section 97(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C(4) amended 18 March 2019 section 181(1)(a) section 181(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 46C(4)(a) amended 18 March 2019 section 181(1)(b) section 181(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 46C(4)(b) amended 18 March 2019 section 181(1)(c) section 181(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 46C(5) amended 29 March 2024 section 65(1) section 65(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EW 46C(5) amended 30 March 2022 section 97(10) section 97(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C(5) amended 18 March 2019 section 181(2)(a) section 181(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 46C(5)(a) amended 18 March 2019 section 181(2)(b) section 181(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 46C(5)(b) amended 18 March 2019 section 181(2)(c) section 181(3) Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 Section EW 46C(5B) heading inserted 29 March 2024 section 65(2) section 65(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EW 46C(5B) inserted 29 March 2024 section 65(2) section 65(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EW 46C(5C) heading inserted 29 March 2024 section 65(2) section 65(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EW 46C(5C) inserted 29 March 2024 section 65(2) section 65(4) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EW 46C(6) nominal shares amended 31 March 2023 section 56(1) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 46C(6) proportional debt ratio amended 30 March 2022 section 97(11) section 97(12) Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 Section EW 46C list of defined terms exempt ESS inserted 31 March 2023 section 56(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 46C list of defined terms generally accepted accounting practice inserted 29 March 2024 section 65(3) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024
EW 46D: Consideration when insolvent company’s debt repaid with consideration received for issuing shares
When this section applies
1: This section applies when—
a: a company is a debtor; and
b: the debtor or a person ( person A person B
c: under the arrangement, the debtor or person A issues shares to person B for consideration; and
cb: the shares are not issued on conversion of a debt instrument that—
i: was issued when the debtor satisfied the solvency test set out in section 4
ii: at the time of its issue, was convertible into shares at a future time; and
d: the debtor does not satisfy the solvency test set out in section 4
i: immediately before the arrangement is entered into:
ii: immediately before the issue of the shares; and
e: the terms of the arrangement require the debtor or person A to use some or all of the consideration to pay, directly or indirectly, an amount of the debtor’s debt to the creditor; and
f: section EW 46C
g: the debtor or person A uses some or all of the consideration to pay, directly or indirectly, the amount of the debtor’s debt to the creditor. Consideration
2: The debtor or person A, as applicable, is treated as—
a: not having paid, directly or indirectly, the amount of the debtor’s debt to the creditor; and
b: having made a payment, at the time the shares were issued, of an amount of the debtor’s debt to the creditor equal to the amount calculated using the formula in subsection (3). Formula
3: The formula is— shares’ market value × repayment ÷ total consideration. Definition of items in formula
4: In the formula,—
a: shares’ market value
b: repayment
c: total consideration amount arrangement associated person company consideration issue market value pay share Section EW 46D inserted 1 April 2023 section 57 Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 46D(1)(cb) inserted 28 March 2024 section 66(1) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Section EW 46D list of defined terms issue inserted 28 March 2024 section 66(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Consideration when legal defeasance has occurred
EW 47: 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 2004 No 35 s EW 48 Consideration for cessation of LTCs and dissolution of partnerships Heading inserted 29 March 2018 section 82(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
EW 47B: Cessation of LTCs and dissolution of partnerships
When this section applies
1: This section applies when—
a: a person is required to calculate a base price adjustment under section EW 29(14)
b: the person has an accrued entitlement. Consideration limited to owner’s interests
2: The person is treated as—
a: having paid all the consideration paid, or that is or will be payable, by them for or under the relevant financial arrangement, multiplied by the proportion of their owner’s interests or partner’s interests in the financial arrangement in their non-private capacity; and
b: having been paid the market value, on the date of disposal, of the accrued entitlement, multiplied by the proportion of their owner’s interests or partner’s interests in the financial arrangement in their non-private capacity. dispose financial arrangement owner’s interests partner partner’s interests Section EW 47B inserted 29 March 2018 section 82(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Consideration when anti-avoidance provision applies
EW 48: 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 GB 21
b: section GC 7
c: section GC 8 person); or
d: sections GC 20 GC 21 Consideration
2: The consideration is the amount determined under the relevant provision. amount consideration pay 2004 No 35 s EW 49 Section EW 48(1)(c) amended 30 March 2021 section 50(1) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EW 48(1)(d) inserted 30 March 2021 section 50(2) section 50(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Income and deduction provisions specifically related to financial arrangements
EW 49: Income and deduction when debt
disposed of When this section applies
1: This section applies when a creditor disposes of At a discount
2: A creditor disposes of disposes of Market value
3: 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
4: 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
5: 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 13(1) Repayment of debt in certain circumstances amount associated person deduction income pay 2004 No 35 s EW 50 Section EW 49 heading amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 49(1) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 49(1) amended 1 April 2010 section 22 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EW 49(2) amended 24 February 2016 section 242(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EW 49(5)(b) amended 1 April 2017 section 77 Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section EW 49 list of defined terms 1988 version provisions repealed 1 April 2010 section 594 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EW 49B: Guarantees for associated persons
When this section applies
1: This section applies when a guarantor pays an amount under a guarantee (a guarantee payment debtor Repayment
2: For the debtor, the amount of the guarantee payment is treated as consideration paid or payable by the debtor for the debt. New debt
3: If the guarantor has recourse to the debtor in relation to the guarantee payment, the guarantor is treated as providing the debtor with an interest-free loan for the amount of the guarantee payment. No consideration paid
4: For the guarantor, the guarantee payment is treated as not being consideration paid or payable by the guarantor. Repayment: income and deduction
5: If the debtor later repays the guarantor more than the guarantee payment, the excess paid by the debtor is—
a: income, under section CC 3(1)
b: a deduction that the debtor is allowed under section DB 13(1) amount associated person deduction income Section EW 49B inserted 1 April 2017 section 78(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EW 50: 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 41 CW 42
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 41 CW 42
g: the distribution is made on or after 20 May 1999. Exclusion
2: This section does not apply when—
a: a trust ( trust A
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 41 CW 42
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
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 41 CW 42 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 pay trustee 2004 No 35 s EW 51
EW 51: Deduction for security payment
When subsection (2) applies: loss generally
1: Subsection (2) applies when a person is allowed a deduction under section DB 14(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 14(4) Amount of deduction
4: The person is allowed a deduction no greater than the amount of the security payment. amount deduction pay security payment 2004 No 35 s EW 52 Treatment of original share acquired under financial arrangement
EW 52: 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 (the 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 2004 No 35 s EW 52B
EW 52B: Excepted financial arrangements involving pre-1990 forest land emissions units
When this section applies
1: This section applies to an arrangement that is an excepted financial arrangement under section EW 5(11C)
a: the holder (the unit holder original unit security assignment lender
b: the lender is required to make a later assignment (the security return returned unit Unit holder treated as continuing to hold pre-1990 forest land emissions unit
2: The unit holder is treated as continuing to hold a pre-1990 forest land emissions unit for the period beginning with the day on which the arrangement begins and ending with the day given by subsection (3) for the security assignment, subject to subsections (4) and (5). Timely security return
3: Subsection (4) applies if the security return occurs on or before the day that is the earlier of—
a: the day on which the security return is required under the arrangement:
b: the day on which the arrangement comes to an end. Effect of timely security return
4: If the unit holder receives a returned unit under the arrangement on or before the day given by subsection (3),—
a: the returned unit is treated as being the original unit; and
b: the unit holder is treated as continuing to hold the original unit for the period beginning with the day on which the arrangement begins and ending with the day of the security return; and
c: the original unit and the returned unit are treated as having a value for the unit holder equal to the cost of the original unit for the unit holder immediately before the arrangement begins; and
d: the original unit and the returned unit are treated as having a value for the lender of—
i: the cost of the original unit for the unit holder immediately before the arrangement begins, for the security assignment and the security return:
ii: zero, for an assignment of the original unit other than the security return. Effect of failure to make timely security return
5: If the unit holder does not receive a returned unit under the arrangement on or before the day given by subsection (3),—
a: the original unit is treated as being assigned to the lender on the day of the security assignment; and
b: the unit holder is treated as ceasing to hold the original unit from the day of the security assignment; and
c: the original unit is treated as having a value for the unit holder and the lender at the time of the security assignment equal to the market value of the original unit for the unit holder immediately before the arrangement begins. Relationship with section ED 1
6: Subsections (4)(c) and (d) and (5)(c) override sections EA 1(4)(c) ED 1 arrangement associated person emissions unit excepted financial arrangement New Zealand emissions unit pre-1990 forest land emissions unit Section EW 52B inserted 26 June 2019 section 64(1) section 64(2) Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 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 pay prescribed 2004 No 35 s EW 53 Application of financial arrangements rules to cash basis persons
EW 54: Meaning of cash basis person
Who is cash basis person
1: A person is a cash basis person
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) Persons excluded by Commissioner
2: A person may be excluded under section EW 59 cash basis person financial arrangement income year Section EW 54 substituted 1 April 2009 section 9(1) Taxation (Business Tax Measures) Act 2009
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 (12) cash basis person financial arrangement spreading method 2004 No 35 s EW 55
EW 56: Natural person
Section EW 56 repealed 1 April 2009 section 10(1) Taxation (Business Tax Measures) Act 2009
EW 57: Thresholds
Income and expenditure threshold
1: For the purposes of section EW 54(1)(a)(i) Absolute value threshold
2: For the purposes of section EW 54(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 54(1)(b) Formula
4: The formula is— (accrual income − cash basis income) Definition of items in formula
5: The items in the formula are defined in subsections (6) to (9). Accrual income
6: Accrual income
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 Cash basis expenditure
8: Cash basis expenditure Accrual expenditure
9: Accrual expenditure
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. Increase in specified sums
10: The Governor-General may make an Order in Council increasing a sum specified in any of subsections (1) to (3). Secondary legislation
11: An Order in Council under subsection (10) is secondary legislation ( see Part 3 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 2004 No 35 s EW 57 The following table is small in size and has 3 columns that are grouped under the heading Legislation Act 2019 requirements for secondary legislation made under this section. Legislation Act 2019 requirements for secondary legislation made under this section Publication PCO must publish it on the legislation website and notify it in the Gazette LA19 s 69(1)(c) Presentation The Minister must present it to the House of Representatives LA19 s 114 cl 32(1)(a) Disallowance It may be disallowed by the House of Representatives LA19 ss 115 116 This note is not part of the Act. Section EW 57(1) amended 1 April 2009 section 11(1) Taxation (Business Tax Measures) Act 2009 Section EW 57(2) amended 1 April 2009 section 11(2) Taxation (Business Tax Measures) Act 2009 Section EW 57(3) amended 1 April 2009 section 11(3) Taxation (Business Tax Measures) Act 2009 Section EW 57(10) heading added 1 April 2009 section 11(4) Taxation (Business Tax Measures) Act 2009 Section EW 57(10) added 1 April 2009 section 11(4) Taxation (Business Tax Measures) Act 2009 Section EW 57(11) heading inserted 28 October 2021 section 3 Secondary Legislation Act 2021 Section EW 57(11) inserted 28 October 2021 section 3 Secondary Legislation Act 2021
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) the person
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: Beneficiary of bare trust
3: This subsection applies when the trustee of a bare trust is a party to a financial arrangement. A person
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. Beneficiary of trust other than bare trust
4: This subsection applies when a person 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. Trustee
5: This subsection applies when a person 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 2004 No 35 s EW 58 Section EW 58(1) amended 1 April 2009 section 12(1) Taxation (Business Tax Measures) Act 2009 Section EW 58(2) heading repealed 1 April 2008 section 13(1) Taxation (Limited Partnerships) Act 2008 Section EW 58(2) repealed 1 April 2008 section 13(1) Taxation (Limited Partnerships) Act 2008 Section EW 58(3) heading substituted 1 April 2009 section 12(2)(a) Taxation (Business Tax Measures) Act 2009 Section EW 58(3) amended 1 April 2009 section 12(2)(b) Taxation (Business Tax Measures) Act 2009 Section EW 58(4) heading substituted 1 April 2009 section 12(3)(a) Taxation (Business Tax Measures) Act 2009 Section EW 58(4) amended 1 April 2009 section 12(3)(b) Taxation (Business Tax Measures) Act 2009 Section EW 58(5) heading substituted 1 April 2009 section 12(4)(a) Taxation (Business Tax Measures) Act 2009 Section EW 58(5) amended 1 April 2009 section 12(4)(b) Taxation (Business Tax Measures) Act 2009
EW 59: Exclusion by Commissioner
The Commissioner may treat a 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—
a: the person, or any other person, has structured and promoted the class to defer an income tax liability:
b: the parties to a financial arrangement are associated, and the person's calculation of income and expenditure under the financial arrangement differs from that used by the associated person. associated person cash basis person Commissioner financial arrangement income income tax liability Section EW 59 substituted 1 April 2009 section 13(1) Taxation (Business Tax Measures) Act 2009
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 54(1)(a) and (b) 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 54(1)(a) and (b) Modifications to be read in
4: For the purposes of this section, sections EW 54 and EW 55 cash basis person financial arrangement income year trustee 2004 No 35 s EW 60 Section EW 60(2)(b) amended 1 April 2009 section 14(1) Taxation (Business Tax Measures) Act 2009 Section EW 60(3) amended 1 April 2009 section 14(1) Taxation (Business Tax Measures) Act 2009 Section EW 60(4) amended 1 April 2009 section 14(2) Taxation (Business Tax Measures) Act 2009
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 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 2004 No 35 s EW 61
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 2004 No 35 s EW 62
EW 63: Cash basis adjustment formula
Formula
1: A person calculates a cash basis adjustment using the formula— adjusted income − adjusted expenditure − previous income Definition of items in formula
2: The items in the formula are defined in subsections (3) to (6). Adjusted income
3: Adjusted income
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
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 Previous expenditure
6: Previous expenditure amount cash basis person financial arrangement income income year spreading method 2004 No 35 s EW 63
EX: Controlled foreign company and foreign investment fund rules
Contents
Controlled foreign company (CFC) rules When is a company a controlled foreign company?
EX 1: Meaning of controlled foreign company
Tests of control
1: A foreign company is a controlled foreign company (CFC)
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
2: Even if a test
a: the foreign company is a foreign PIE equivalent
b: 1 of the New Zealand residents is—
i: a portfolio investment entity:
ii: an entity that qualifies for PIE status:
iii: a life insurance company. Status applies for whole accounting period
3: 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 (2) does not apply at the time, the company is treated as a CFC for the whole of the accounting period. accounting period associated person CFC company control interest control interest category foreign company foreign investment vehicle life insurance New Zealand resident portfolio investment entity shareholder decision-making right 2004 No 35 s EX 1 Section EX 1(1)(b)(i) substituted 7 September 2010 section 42(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EX 1(2) amended 1 April 2008 section 381 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 1(2)(a) amended 1 April 2010 section 149(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 1(2)(b)(ii) substituted 1 April 2010 section 149(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 1 list of defined terms control repealed 1 April 2010 section 594 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Calculation of person’s control interest
EX 2: Four categories for calculating control interests
Separate categories
1: Under section EX 5(1) control interest 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 right 2004 No 35 s EX 2
EX 3: Control interest: total of direct, indirect, and associated person interests
Calculation of control interest
1: 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. Avoidance arrangements: first kind
2: Section GB 7 Avoidance arrangements: other kinds
3: Any of the following sections may apply to the calculation of a person’s control interest:
a: section GB 9
b: section GB 10
c: section GB 11
d: section GB 12
e: section GB 13
f: section GB 14 associated person control interest direct control interest foreign company New Zealand resident 2004 No 35 ss EX 3 GC 7 GC 9
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(1)(b) and (d) associated person CFC control interest direct control interest foreign company New Zealand resident non-resident relative 2004 No 35 s EX 4
EX 5: Direct control interests
Categories of direct control interests
1: A person has a direct control interest
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 YA 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 FA 2 debentures), FA 2B FZ 1 accounting period available subscribed capital control interest category direct control interest foreign company income interest pay share shareholder decision-making right slice rule 2004 No 35 s EX 5 Section EX 5(1)(c) replaced 30 June 2014 section 84(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 5(1)(d) replaced 30 June 2014 section 84(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 5(5)(c) amended 6 October 2009 section 150 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 2004 No 35 s EX 6
EX 7: Indirect control interests
How indirect control interests arise
1: A person has an indirect control interest 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 interest direct control interest foreign company income interest New Zealand resident 2004 No 35 s EX 7 Section EX 7 list of defined terms control repealed 1 April 2010 section 594 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Calculation of person’s income interest
EX 8: Income interests: total of direct and indirect interests
Calculation of income interest
1: 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. Avoidance arrangements
2: Any of the following sections may apply to the calculation of a person’s income interest:
a: section GB 9
b: section GB 10
c: section GB 11
d: section GB 12
e: section GB 13
f: section GB 14 CFC control interest category direct control interest direct income interest income income interest indirect income interest 2004 No 35 s EX 8
EX 9: Direct income interests
Categories of direct income interest
1: A person has a direct income interest
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 YA 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 FA 2 debentures), FA 2B FZ 1 accounting period available subscribed capital CFC debentures direct income interest foreign company income interest pay share shareholder decision-making right slice rule 2004 No 35 s EX 9 Section EX 9(1)(c) replaced 30 June 2014 section 85(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 9(1)(d) replaced 30 June 2014 section 85(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 9(6)(c) amended 6 October 2009 section 151 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 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 2004 No 35 s EX 10
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 (the first CFC Entitlement to acquire
2: This section applies when 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 (the option 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: in the absence of this section, the effect of the option would be to defeat the intent and application of subpart CQ (Attributed income from foreign equity) or DN (Attributed losses from foreign equity) or this subpart, taking into account the economic benefit that the person gets as a result of the CFC deriving income:
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 pay 2004 No 35 s EX 11 Section EX 11(3)(b) amended 1 April 2008 section 382 Taxation (Business Taxation and Remedial Matters) Act 2007
EX 12: Reduction of total income interests
Application of this section
1: This section applies when 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— income interest before reduction × 100 accounting period amount CFC income interest shareholder 2004 No 35 s EX 12
EX 13: Income interests of partners
Section EX 13 repealed 1 April 2008 section 14(1) Taxation (Limited Partnerships) Act 2008 Ten percent threshold and variations in income interest level
EX 14: Attribution: 10% threshold, not PIE
Persons with attributed CFC income or loss
1: A person has attributed CFC income or loss from a CFC only if the person—
a: has an income interest in the CFC of 10% or more for the relevant accounting period; and
b: is not a portfolio investment entity. Portfolio investment entity
2: A portfolio investment entity that would have attributed CFC income or loss from a CFC in the absence of subsection (1)(b) has FIF income or loss from the CFC under the FIF rules. accounting period attributed CFC income CFC FIF income FIF rules income interest loss PIE portfolio investment entity Section EX 14 replaced 7 May 2012 section 18(1) Taxation (International Investment and Remedial Matters) Act 2012
EX 15: Associates and 10% threshold
Associates included
1: For the purpose of applying the 10% threshold in sections CD 45 CQ 2 EX 14 EX 21 EX 34 EX 58 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 2004 No 35 s EX 15 Section EX 15(1) substituted 1 April 2008 section 383 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 15(1) amended 6 October 2009 section 152(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 15(1) amended 6 October 2009 section 152(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
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:
b: section CQ 2(3)
c: section CQ 5(4) accounting period attributed CFC income CFC dividend FIF income income interest New Zealand resident non-resident transitional resident 2004 No 35 s EX 16 Section EX 16(3)(a) repealed 24 February 2016 section 136(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 16 list of defined terms attributed repatriation repealed 24 February 2016 section 136(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EX 17: Income interest if variations within period
When this section applies
1: This section applies when 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— income interest for day ÷ days in period. 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 2004 No 35 s EX 17 Calculation of attributed CFC income or loss
EX 18A: Scheme for finding person's attributed CFC income or loss
Formula and rules for calculation
1: The attributed CFC income or loss of a person (an interest holder sections CQ 2(1) DN 2(1)
a: the formula in section EX 18
b: the interest holder's additional CFC attributed income under section EX 19
c: the reduction in the interest holder's attributed CFC loss under section EX 20 Determination of attributed CFC income or loss from attributable CFC amount
2: An interest holder with an income interest of a fraction (the fraction section EX 20B section EX 18
a: attributed CFC income or loss equal to the fraction of the CFC's net attributable CFC income or loss under sections EX 20C to EX 20E sections EX 21 EX 24 to EX 27
b: no attributed CFC income or attributed CFC loss, if the CFC is—
i: a non-attributing active CFC under section EX 21B subsection (3), for which the interest holder is not affected by an election under section EX 73
ii: a non-attributing Australian CFC under section EX 22 Non-attributing active CFCs
3: Whether a CFC is a non-attributing active CFC is determined under section EX 21B
a: a test in—
i: section EX 21D
ii: section EX 21E section EX 21C
b: the rules in sections EX 21 EX 24 to EX 27 accounting period attributable CFC amount attributed CFC income attributed CFC loss CFC non-attributing active CFC non-attributing Australian CFC Section EX 18A inserted 6 October 2009 section 153(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 18A(2)(b)(i) amended 2 November 2012 section 40(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
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 net attributable CFC income accounting period amount attributed CFC income attributed CFC loss CFC income interest loss net attributable CFC income 2004 No 35 s EX 18 Section EX 18 formula amended 6 October 2009 section 154(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 18 list of defined terms branch equivalent income repealed 6 October 2009 section 154(2)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 18 list of defined terms net attributable CFC income inserted 6 October 2009 section 154(2)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 19: Taxable distribution from non-complying trust
Application of this section
1: This section applies when—
a: a CFC derives a taxable distribution from a non-complying 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 net attributable CFC income Additional attributed CFC income
2: The taxable distribution is excluded under section EX 21(32) net attributable CFC income 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 × taxable distribution. Non-complying trust tax rate
4: The person is liable for income tax on the additional attributed CFC income at the rate in schedule 1 RSCT, section HC 19 Disclosure restrictions on grey list CFCs
5: accounting period amount attributed CFC income CFC income interest income tax loss net attributable CFC income non-complying trust taxable distribution 2004 No 35 s EX 19 Section EX 19(1)(b) amended 6 October 2009 section 155(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 19(2) amended 6 October 2009 section 155(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 19(4) amended 1 April 2008 section 384 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 19(5) heading repealed 6 October 2009 section 155(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 19(5) repealed 6 October 2009 section 155(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 19 list of defined terms branch equivalent income repealed 6 October 2009 section 155(4)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 19 list of defined terms net attributable CFC income inserted 6 October 2009 section 155(4)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 20: Reduction in attributed CFC loss
Application of this section: no economic loss
1: This section applies when—
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 2004 No 35 s EX 20 Attributable CFC amount and net attributable CFC income or loss Heading inserted 6 October 2009 section 156(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 20B: Attributable CFC amount
Attributable CFC amount
1: Attributable CFC amount section EX 21 gross + arrangement − apportioned funding income. Definition of items in formula
2: The items in the formula in subsection (1) are defined in subsections (3) to (4B) Gross
3: Gross
a: a dividend that is paid in relation to rights that are a direct income interest in a foreign company, meet the requirements of neither section EX 34 section EX 35
i: section EX 31
ii: section EX 32
iii: section EX 36
iv: section EX 37
v: section EX 37B
vi:
b: a dividend that is paid by a company resident in New Zealand to the extent to which the dividend is not fully imputed:
c: an amount that is not a distribution from an associated non-attributing active CFC and is—
i: a deductible foreign equity distribution (the distribution) section EX 59(1)
ii: a distribution for fixed-rate foreign equity:
d: a royalty of a type referred to in subsection (5):
e: rent of a type referred to in subsection (6):
f: income from a business of insurance or from being an insurer:
g: income from a life insurance policy of a type referred to in subsection (8):
h: income from the supply of personal services of a type referred to in subsection (9):
i: income from the disposal of revenue account property that is a share, other than a share referred to in subsection (10):
j: income from the disposal of revenue account property that is an option to acquire or dispose of a share:
k: income from the disposal of revenue account property that is—
i: not a share, financial arrangement, or life insurance policy; and
ii: used by the CFC with a purpose or effect of giving rise to income of the CFC referred to in another paragraph of this subsection:
l: income from a service, other than a telecommunications service, to the extent to which the service is physically performed in New Zealand:
m: income from a service relating to the use of equipment to provide a telecommunications service, to the extent to which the equipment is at the time—
i: physically located outside any country or territory; and
ii: owned by the CFC or by a FIF that is associated with the CFC; and
iii: not a mobile telephone handset or a radio receiver and transmitter for a ship or aircraft:
n: income from a telecommunications service to the extent to which the service is physically performed in New Zealand and is not described in subsection (11):
o: attributed PIE income that, for a CFC, is not excluded income under section CX 56
p: a dividend that is excluded by section CD 36(2) section CD 36(1) Arrangement
4: Arrangement section CC 3
a: an arrangement that—
i: is a financial arrangement, or a short-term agreement for sale and purchase for which the CFC has made an election under section EW 8
ii: is not a derivative instrument; and
iii: is not referred to in subsection (12):
b: a derivative instrument—
i: that is held in the course of a business of the CFC for the purpose of dealing with the derivative instrument:
ii: that is not entered in the ordinary course of a business of the CFC:
iii: to the extent to which the income IFRS 9 Apportioned funding income
4B: Apportioned funding income
a: if the CFC is an entity carrying on a business of banking or insurance or is directly or indirectly controlled by such an entity, zero:
b: if paragraph (a) does not apply, the amount calculated using the formula— funding income × funding fraction × (1 − asset fraction). Definition of items in formula
4C: The items in the formula in subsection (4B)(b) are defined in subsections (4D) to (4F). Funding income
4D: Funding income
a: that provides funds for the CFC; and
b: for which there is no reasonable expectation, when the CFC enters the financial arrangement or when the terms of the financial arrangement are changed, that the CFC will have from the financial arrangement amounts that would be income for the CFC exceeding in total the amounts that would be deductions for the CFC, during—
i: the period in which the CFC is party to the financial arrangement:
ii: a period predictable in advance during which the CFC is a party to the financial arrangement. Funding fraction
4E: Funding fraction section EX 20C(6) Asset fraction
4F: Asset fraction section EX 20C(8) Attributable CFC amount: royalties
5: A royalty derived by a CFC is included in an attributable CFC amount under subsection (3)(d) if none of the following are satisfied:
a: the CFC is regularly engaged in creating, developing, or adding value to property that produces royalties and the royalty is—
i: paid by a person who is not associated with the CFC under section YB 2
ii: from property that is not linked to New Zealand under subsection (13); and
iii: from property that the CFC has created or developed or to which the CFC has added substantial value:
b: the CFC is regularly engaged in creating, developing, or adding value to property that produces royalties and the royalty is—
i: paid by a person who is associated with the CFC under section YB 2
ii: from property that is not linked to New Zealand under subsection (13); and
iii: from property that the CFC has created or developed, or to which the CFC has added substantial value; and
iv: an arm's length amount determined under section GC 13
c: the royalty is—
i: paid by a person who would be an associated non-attributing active CFC in the absence of this paragraph and subsections (7)(c) and (12)(a); and
ii: from property that is not linked to New Zealand under subsection (13):
d: the royalty is—
i: paid to the CFC by a person not associated with the CFC under section YB 2
ii: from property owned by a New Zealand resident who is resident in no other country under all applicable double tax agreements; and
iii: from property licensed to the CFC, or to a CFC associated with the CFC under section YB 2 licensee section GC 13 Attributable CFC amount: rent
6: Rent derived by a CFC is included in an attributable CFC amount under subsection (3)(e) if the rent is not of a type referred to in subsection (7) and is from—
a: a lease or sublease of land:
b: a lease or sublease of personal property:
c: a licence to use intangible property:
d: a hire or bailment. Attributable CFC amount: exclusions from rent
7: Rent derived by a CFC from a source referred to in subsection (6) is not included in an attributable CFC amount under subsection (3)(e) if the rent is—
a: from land in a country or territory with which the CFC has a taxed CFC connection:
b: from property other than land, to the extent to which the rent relates to the use of the property in a country or territory referred to in paragraph (a):
c: paid by a person who would be an associated non-attributing active CFC in the absence of this paragraph and subsections (5)(c) and (12)(a):
d: a payment under a hire purchase agreement:
e: a payment under a finance lease:
f: a royalty:
g: a payment under a licence to use intangible property that—
i: is not a royalty; and
ii: would not be included in an attributable CFC amount under subsection (5) if treated as a royalty for the purposes of that subsection. Attributable CFC amount: income from life insurance contract
8: Income from a life insurance policy is included in an attributable CFC amount under subsection (3)(g) if the income is not included in a calculation of FIF income or loss and is—
a: a distribution, if the life insurance policy is not intended to compensate the CFC for financial losses arising from the death or extended incapacity of a specified employee or member involved in the CFC's business:
b: a distribution that is not intended to compensate the CFC for financial losses arising from the death or extended incapacity of a specified employee or member involved in the CFC's business, if the life insurance policy is intended to compensate the CFC for such losses:
c: income from a disposal of the life insurance policy, if the policy is revenue account property. Attributable CFC amount: income from personal services
9: Income derived by a CFC from the supply of personal services is included in an attributable CFC amount under subsection (3)(h) if the personal services are performed by another person (the working person
a: the working person is a New Zealand resident; and
b: the personal services are not essential support for a product supplied by the CFC; and
c: the working person is associated with the CFC under section YB 3
d: 80% or more of the CFC's total income in the accounting period from supplying personal services is derived through personal services meeting the requirements of paragraph (a) performed by working persons meeting the requirements of paragraph (b); and
e: to derive the income, the CFC uses a business structure that requires depreciable property having, at the end of the accounting period, a total cost under section GB 28(7) section GB 27 performed in the accounting period; and
f: a person who holds an attributing interest in the CFC files, after the date on which the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Exclusions from attributable CFC amount: shares
10: Income derived by a CFC from the disposal of a share that is revenue account property is not included in an attributable CFC amount under subsection (3)(i) if the CFC's FIF income or loss from the share in the period ending with the disposal is calculated using—
a: the comparative value method:
b: the deemed rate of return method:
c: the fair dividend rate method:
d: the cost method. Exclusions from attributable CFC amount: telecommunications services in New Zealand
11: Income of a CFC from a telecommunications service physically performed in New Zealand is not included in an attributable CFC amount under subsection (3)(n) if—
a: the service is the transmission, emission, or reception of information between New Zealand and a country or territory with which the CFC has a taxed CFC connection; and
b: the CFC is a network operator under the Telecommunications (Interception Capability and Security) Act 2013 network operator
i: a group of persons has, for the whole of the CFC's accounting period, voting interests and, if a market value circumstance
ii: the group of persons also has, for the whole of the CFC's accounting period, voting interests and, if a market value circumstance exists, market value interests, of more than 50% in a network operator; and
c: the service is performed by a person, other than the CFC, who—
i: is resident in New Zealand, and is resident in no other country under all applicable double tax agreements:
ii: has a fixed establishment in New Zealand that is a permanent establishment under all applicable double tax agreements; and
d: the service is performed by the person as part of a business in New Zealand of providing telecommunication services in New Zealand—
i: carried on through the person's fixed establishment, if the person is not resident in New Zealand; and
ii: from which the person derives assessable income of more than $5,000,000 per annum. Exclusions from attributable CFC amount: income from financial arrangements other than derivative instruments
12: Income of a CFC from a financial arrangement or excepted financial arrangement that is referred to in subsection (4)(a)(i) is not included in an attributable CFC amount under subsection (4)(a) if the financial arrangement or agreement is—
a: an agreement by the CFC to lend money to a person who would be an associated non-attributing active CFC in the absence of this paragraph and subsections (5)(c) and (7)(c):
b: an agreement for the sale or purchase of property or services or a hire purchase agreement—
i: entered in the ordinary course of business by the CFC:
ii: for property or services produced or used by the CFC in business. Royalties: property linked to New Zealand
13: Property giving rise to a royalty is linked to New Zealand at a time in an accounting period for the purposes of subsection (5) if the property meets the requirements of subsection (14) at a time in the period—
a: beginning—
i: at the time the property was created, if the property has not since met the requirements of subsection (15); or
ii: from the time the property most recently met the requirements of subsection (15); and
b: ending at the time in the accounting period. Situations creating link with New Zealand
14: Property owned by a CFC has a link with New Zealand if the property—
a: has been owned by a New Zealand resident:
b: has been owned by a non-resident for the purposes of a business carried on in New Zealand through a fixed establishment in New Zealand:
c: was created or developed in New Zealand:
d: has had substantial value added in New Zealand:
e: has been acquired by a person who had a deduction for expenditure or loss incurred in the acquisition:
f: is based on knowledge acquired by a person who—
i: acquired the knowledge with a purpose or intention of creating the property; and
ii: had a deduction for expenditure or loss incurred in the acquisition:
g: is created or developed from activities, or from the extension, continuation, development, or completion of activities, if the activities produced knowledge acquired by a person who had a deduction for expenditure or loss incurred in the acquisition. Situations breaking link with New Zealand
15: There is no link between property and New Zealand for a CFC when the property is owned by a non-resident who—
a: is not a CFC and is not associated with the CFC; and
b: is not associated with a person who has owned the property while it had a link with New Zealand. accounting period agreement for the sale or purchase of property or services associated associated non-attributing active CFC attributable CFC amount attributable FIF income method attributed PIE income business CFC comparative value method deductible foreign equity distribution deduction deemed rate of return method depreciable property derivative instrument dividend excluded income exempt income fair dividend rate method finance lease financial arrangement fixed-rate foreign equity fully imputed general insurance group of persons hire purchase agreement IFRS 9 income insurance contract interest land life insurance life insurance policy loan loss market value circumstance market value interest money lent New Zealand New Zealand resident non-attributing active CFC non-resident reinsurance contract relative resident in New Zealand revenue account property royalty share short-term agreement for sale and purchase taxed CFC connection telecommunications service voting interest Section EX 20B inserted 6 October 2009 section 156(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 20B(1) formula replaced 30 June 2014 section 86(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(2) amended 30 June 2014 section 86(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(3)(a) amended 7 May 2012 section 19(1) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B(3)(a)(vi) repealed 30 March 2025 section 50 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section EX 20B(3)(c) replaced 1 April 2023 section 58(1) section 58(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EX 20B(3)(f) replaced 2 November 2012 section 41(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20B(3)(m)(ii) replaced 7 May 2012 section 19(2) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B(3)(n) amended 29 August 2011 section 36(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EX 20B(3)(o) added 29 August 2011 section 36(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EX 20B(3)(p) inserted 7 May 2012 section 19(3) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B(4) heading substituted 7 December 2009 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 20B(4)(b)(iii) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 20B(4)(b)(iii) amended 7 December 2009 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 20B(4B) heading inserted 30 June 2014 section 86(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(4B) inserted 30 June 2014 section 86(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(4C) heading inserted 30 June 2014 section 86(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(4C) inserted 30 June 2014 section 86(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(4D) heading inserted 30 June 2014 section 86(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(4D) inserted 30 June 2014 section 86(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(4E) heading inserted 30 June 2014 section 86(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(4E) inserted 30 June 2014 section 86(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(4F) heading inserted 30 June 2014 section 86(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(4F) inserted 30 June 2014 section 86(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20B(5)(a)(i) substituted 1 April 2010 section 157(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 20B(5)(d)(i) replaced 7 May 2012 section 19(4) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B(5)(d)(ii) replaced 7 May 2012 section 19(4) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B(5)(d)(iii) replaced 7 May 2012 section 19(4) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B(7)(a) replaced 7 May 2012 section 19(5) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B(9)(c) substituted 1 April 2010 section 157(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 20B(9)(e) amended 24 February 2016 section 137(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 20B(9)(f) inserted 24 February 2016 section 137(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 20B(11)(a) replaced 7 May 2012 section 19(6) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B(11)(b) substituted 7 December 2009 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 20B(11)(b) amended 11 May 2014 section 123 Telecommunications (Interception Capability and Security) Act 2013 Section EX 20B(11)(b)(i) amended 7 September 2010 section 43(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EX 20B(11)(c) replaced 7 May 2012 section 19(7) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B(11)(d) replaced 7 May 2012 section 19(7) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B list of defined terms attributable FIF income method inserted 7 May 2012 section 19(8) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B list of defined terms attributed PIE income inserted 29 August 2011 section 36(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EX 20B list of defined terms excluded income inserted 29 August 2011 section 36(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EX 20B list of defined terms group of persons inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 20B list of defined terms IFRS 9 inserted 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 20B list of defined terms market value circumstance inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 20B list of defined terms market value interest inserted 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 20B list of defined terms taxed CFC connection inserted 7 May 2012 section 19(9) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20B list of defined terms voting interest added 7 December 2009 section 126 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
EX 20C: Net attributable CFC income or loss
CFC's net attributable CFC income or loss
1: For the purpose of calculating the attributed CFC income or loss for an accounting period of a person (the interest holder
a: the CFC's net attributable CFC income
b: the CFC's net attributable CFC loss
i: the absolute value of the amount calculated using the formula in subsection (2), if that amount is less than zero:
ii: zero, if subparagraph (i) does not apply. Formula for net attributable CFC income or loss
2: The amount of a CFC's net attributable CFC income or loss for an accounting period is calculated using the rules in section EX 21 attributable CFC − apportioned funding costs − other deductions. Definition of items in formula
3: In the formula in subsection (2),—
a: attributable CFC
b:
c: apportioned funding costs funding costs × funding fraction × cost fraction:
d: other deductions Definition of items in formula
4: The items in the formula in subsection (3)(c) are defined in subsections (6), (10), and (11). Funding income
5: Funding fraction
6: Funding fraction
a: if the item funding
b: if the item is being used to calculate the item apportioned funding costs
c: if neither of paragraphs (a) and (b) apply, the amount calculated using the formula— (funding − group funding) ÷ funding. Definition of items in formula
7: In the formula in subsection (6),—
a: funding
i: a financial arrangement to which the CFC is a party and which provides funds for the CFC:
ii: a fixed rate foreign equity, or share giving a right to a deductible foreign equity distribution, issued by the CFC and held by a company that is a New Zealand resident, a CFC, or a FIF for which the interest holder uses the attributable FIF income method
b: group funding
i: under which the CFC provides funds to another CFC associated with the CFC under section YB 2 (Two companies) or to a FIF for which the interest holder uses the attributable FIF income method and that is associated with the CFC under section YB 2; and
ii: that produces for the CFC an amount that is included in the item arrangement under section EX 20B(4) or is a deductible foreign equity distribution or a distribution for fixed-rate foreign equity. Asset fraction
8: Asset fraction (attributable CFC’s assets − group funding) Definition of items in formula
9: In the formula in subsection (8),—
a: attributable CFC's assets
b: group funding
i: zero, if subparagraph (ii) does not apply; or
ii: the amount of the item group funding
c: total CFC's assets Funding costs
10: Funding costs
a: would be a deduction of the CFC relating to a financial arrangement to which the CFC is a party and which provides funds for the CFC:
b: is a distribution relating to fixed-rate foreign equity or a deductible foreign equity distribution of the CFC , other than a deductible foreign equity distribution (the distribution section EX 59(1) New Zealand, to another CFC, or to a FIF for which the interest holder uses the attributable FIF income method Cost fraction
11: Cost fraction
a: if the CFC is not excessively debt funded under section EX 20D asset fraction
b: if the CFC is excessively debt funded under section EX 20D
i: the amount of the item asset fraction
ii: the amount calculated under section EX 20D Determining debts and assets of CFC
12: For the items referred to in subsection (9) sections FE 8 to FE 11
a: an excess debt outbound company; and
b: the only member of the CFC's New Zealand group. Requirements for item other deductions
13: Amounts of expenditure or loss contribute to the item other deductions
a: the amounts do not relate to a financial arrangement or share and—
i: are incurred for the purpose of deriving an attributable CFC amount; and
ii: are not incurred for the purpose of deriving an amount that is not an attributable CFC amount; and
iii: correspond to amounts that would be deductions of the CFC after the adjustments that would be made under sections CH 2 DB 50
b: the amounts relate to financial arrangements or shares referred to in the definition of the item funding funding costs funding fraction apportioned funding costs
c: the amounts—
i: do not relate to financial arrangements that provide funds for the CFC; and
ii: relate to financial arrangements referred to in section EX 20B(4) accounting period attributable CFC amount CFC deductible foreign equity distribution deduction financial arrangement fixed-rate foreign equity generally accepted accounting practice income interest interest loss net attributable CFC income net attributable CFC loss share Section EX 20C inserted 6 October 2009 section 156(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 20C(2) formula replaced 30 June 2014 section 87(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20C(3) heading replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(3) replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(3)(b) repealed 30 June 2014 section 87(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20C(4) heading replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(4) replaced 30 June 2014 section 87(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20C(5) heading repealed 30 June 2014 section 87(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20C(5) repealed 30 June 2014 section 87(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20C(6) heading replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(6) replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(7) heading replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(7) replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(7)(a)(ii) amended 2 November 2012 section 42(3) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(7)(b) replaced 30 June 2014 section 87(5) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20C(8) heading replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(8) replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(9) heading replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(9) replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(9B) heading repealed 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(9B) repealed 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(10) heading replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(10) replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(10)(b) amended 1 April 2023 section 59(1) section 59(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EX 20C(10)(b) amended 2 November 2012 section 42(5) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(11) heading replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(11) replaced 2 November 2012 section 42(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(12) amended 2 November 2012 section 42(6) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(13) heading inserted 2 November 2012 section 42(7) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(13) inserted 2 November 2012 section 42(7) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20C(13)(a)(iii) replaced 1 April 2016 section 138(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
EX 20D: Adjustment of
cost fraction When this section applies
1: This section applies for the purposes of the item (the CFC's cost fraction section EX 20C(11) interest holder Excessive debt funding
2: A CFC is excessively debt funded under this section if—
a: the amount (the CFC's debt-asset ratio
b: the amount (the CFC's relative debt-asset ratio section EX 20E Calculations for CFC
3: For the purposes of subsections (4) to (8), the debts and assets of the CFC are determined under sections FE 8 to FE 11
a: an excess debt outbound company; and
b: the only member of the CFC's New Zealand group. Formula for debt-asset ratio of CFC
4: The formula for the CFC's debt-asset ratio referred to in subsection (2)(a) is— (total CFC’s debts − group funding) ÷ (total CFC’s assets − total CFC’s non-debt liabilities Definition of items in formula
5: The items in the formula in subsection (4) are defined in subsections (6) to (8B) Total CFC's debts
6: Total CFC's debts
a: financial arrangements entered by the CFC, each of which—
i: provides funds to the CFC; and
ii: gives rise to an amount for which the CFC would have a deduction:
b: fixed-rate foreign equity that is issued by the CFC and held by a company that is a New Zealand resident, a CFC, or a FIF for which the interest holder uses the attributable FIF income method:
c: shares issued by the CFC in relation to which the CFC makes deductible foreign equity distributions to a company that is a New Zealand resident, a CFC, or a FIF for which the interest holder uses the attributable FIF income method. Group funding
7: Group funding
a: if paragraph (b) does not apply, zero; or
b: if the interest holder chooses to rely on this paragraph and the item total CFC's assets total CFC's debts total CFC's debts
i: under which the CFC provides funds to another CFC associated with the CFC under section YB 2
ii: that produces for the CFC an amount that is included in the item arrangement under section EX 20B(4) Total CFC's assets
8: Total CFC's assets Total CFC’s non-debt liabilities
8B: Total CFC’s non-debt liabilities Cost fraction
9: For a CFC that is excessively debt funded, the item cost fraction sections FE 8 to FE 11
a: an excess debt outbound company; and
b: the only member of the CFC's New Zealand group. Formula for cost fraction
10: The formula for the CFC's cost fraction is— attributable foreign company assets ÷ total foreign company assets. Definition of items in formula
11: The items in the formula in subsection (10) are defined in subsections (12) and (13). Attributable foreign company assets
12: Attributable foreign company assets
a: used for the purpose of deriving an attributable CFC amount or an amount that is included in net attributable FIF income or loss; and
b: not used for the purpose of deriving an amount other than an amount referred to in paragraph (a). Total foreign company assets
13: Total foreign company assets accounting period attributable FIF income method CFC deductible foreign equity distribution deduction excess debt outbound company financial arrangement fixed-rate foreign equity generally accepted accounting practice loss net attributable FIF income New Zealand resident Section EX 20D inserted 6 October 2009 section 156(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 20D heading amended 2 November 2012 section 43(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20D(1) amended 2 November 2012 section 43(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20D(4) formula amended 1 July 2018 section 12(1) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section EX 20D(5) amended 1 July 2018 section 12(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section EX 20D(6)(b) replaced 7 May 2012 section 21(1) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20D(6)(c) replaced 7 May 2012 section 21(1) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20D(7)(b) replaced 30 June 2014 section 88(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 20D(8B) heading inserted 1 July 2018 section 12(3) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section EX 20D(8B) inserted 1 July 2018 section 12(3) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section EX 20D(9) heading amended 2 November 2012 section 43(3) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20D(9) amended 2 November 2012 section 43(4) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20D(10) heading amended 2 November 2012 section 43(5) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20D(10) replaced 2 November 2012 section 43(7) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20D(10) amended 2 November 2012 section 43(6) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 20D(12) heading replaced 7 May 2012 section 21(4) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20D(12) replaced 7 May 2012 section 21(4) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20D(13) heading replaced 7 May 2012 section 21(4) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20D(13) replaced 7 May 2012 section 21(4) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20D list of defined terms attributable FIF income method inserted 7 May 2012 section 21(5) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20D list of defined terms generally accepted accounting practice inserted 1 July 2018 section 12(4) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section EX 20D list of defined terms loss inserted 7 May 2012 section 21(5) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20D list of defined terms net attributable FIF income inserted 7 May 2012 section 21(5) Taxation (International Investment and Remedial Matters) Act 2012
EX 20E: Relative debt-asset ratio for CFC
What this section does
1: This section determines the relative debt-asset ratio of a CFC for the purposes of section EX 20D(2)(b) group debt-asset ratio Members of CFC's group and calculations for group
2: For the purposes of subsections (3) to (8),—
a: the members of a CFC's group are—
i: the CFC:
ii: if the interest holder is a company, the members of the worldwide group that the interest holder would have under sections FE 31B FE 31C FE 32
iii: if the interest holder is a trustee, the members of the trustee's worldwide group under section FE 3(1)(b)
iv: if the interest holder is a natural person, the person's worldwide group referred to in section FE 5(1C)(a) to (c)
b: the debts and assets of the CFC's group are determined under sections FE 8 to FE 11 FE 18 Formula for CFC's group debt-asset ratio
3: The formula for the CFC's group debt-asset ratio is— total group debts ÷ (total group assets − total group non-debt liabilities) Definition of items in formula
4: The items in the formula in subsection (3) are defined in subsections (5), (6), and (6B) Total group debts
5: Total group debts
a: financial arrangements entered by the group's members, each of which—
i: provides funds to a group member; and
ii: gives rise to an amount for which a group member would have a deduction:
b: fixed-rate foreign equity issued by a member of the group and held by a company that is a New Zealand resident, a CFC, or a FIF for which the interest holder uses the attributable FIF income method:
c: equity interests issued by a member of the group in relation to which the member makes deductible foreign equity distributions to a company that is a New Zealand resident, a CFC, or a FIF for which the interest holder uses the attributable FIF income method. Total group assets
6: Total group assets Total group non-debt liabilities
6B: Total group non-debt liabilities Formula for CFC's relative debt-asset ratio
7: The formula for the CFC's relative debt-asset ratio is— CFC’s debt-asset ratio ÷ group debt-asset ratio. Definition of items in formula
8: In the formula in subsection (7),—
a: CFC's debt-asset ratio section EX 20D(4)
b: group debt-asset ratio accounting period attributable FIF income method CFC deductible foreign equity distribution deduction excess debt outbound company financial arrangement fixed-rate foreign equity generally accepted accounting practice New Zealand resident Section EX 20E inserted 6 October 2009 section 156(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 20E(3) formula amended 1 July 2018 section 13(1) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section EX 20E(4) amended 1 July 2018 section 13(2) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section EX 20E(5)(b) replaced 7 May 2012 section 22(1) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20E(5)(c) replaced 7 May 2012 section 22(1) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20E(6B) heading inserted 1 July 2018 section 13(3) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section EX 20E(6B) inserted 1 July 2018 section 13(3) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Section EX 20E list of defined terms attributable FIF income method inserted 7 May 2012 section 22(2) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 20E list of defined terms generally accepted accounting practice inserted 1 July 2018 section 13(4) Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 Calculation of branch equivalent income or loss Heading repealed 6 October 2009 section 160 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 21: Attributable CFC amount and net attributable CFC income or loss Calculation rules for CFC
1: The rules in this section apply for the purposes of—
a: calculating the attributable CFC amount for a CFC under section EX 20B
b: calculating the net attributable CFC income or loss for a CFC under section EX 20C
c: determining under section EX 21D Calculation rules for test group of CFCs
1B: For the purpose of determining under section EX 21D
a: the consolidated annual gross income of the group is calculated under the rules in this section; and
b: the consolidated attributable CFC amount of the group 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. 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; and if the CFC has no financial accounts, the currency used is that of the CFC’s country of residence, the result being then converted into New Zealand dollars at the average of the close of trading spot exchange rates for the 15th 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 attributable CFC amount and net attributable CFC income or loss attributable to 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, and for this purpose, 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 attributable CFC amount and net attributable CFC income or loss arising from
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 Definition of items in formula
12: In the formula,—
a: consideration paid to the CFC
b: expenditure
c: consideration paid by the CFC
d: income Provisions that do not apply
13: The following provisions do not apply:
a: the consolidation rules:
b: section CB 27 subparts DQ EH
c: subpart CQ DN
d: section CW 8
db: section CW 9
dc: section CW 10
e: section CW 40(1)
f: sections DO 1 land DO 2 Plantings for erosion, shelter, and water protection purposes
g: sections EW 9 EW 11(b)
h: subpart FE
i: section GB 5
j: sections IA 2 to IA 9 subparts IB IC sections IP 3 to IP 7 IZ 4 IZ 5 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 42 CX 43 CZ 8 DT 1 to DT 15 and DT 17 to DT 19
b: sections DO 4 to DO 7 DO 12 DP 1 to DP 3 DP 8 DP 11
c: section EZ 16 section EZ 15
d: the definitions in subpart YA Transfer pricing rules
15: Sections GC 6 to GC 14
a: section DN 4
b: section IQ 2
c: section IQ 4
d: sections LK 1 to LK 7 Dividends
16: Dividends that are not part of the CFC's attributable CFC amount are exempt income of the CFC. Dividends: exempt income
17: Benefits from money advanced
18: When section CC 7 No tainting by association
19: Sections CB 9 to CB 13 CV 1 Crown acquisition of land
20: Amount of depreciation loss recovered
21: When sections EE 48 to EE 52 GST and value-added taxes
22: When sections CX 1 DB 2 EE 45 section EE 44 EE 54 EZ 17 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—
i: paid by the CFC to a person who is resident in the same country as the CFC and not a non-attributing active CFC; and
ii: 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 (the parent company sections EX 8 to EX 13 Policyholders
26: If the test in subsection (25) is met, net attributable CFC income or loss net attributable CFC income 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 CU 1 to CU 9 DU 1 to DU 12 IS 1 IS 2 Petroleum mining activities
29: Sections CT 1 to CT 3 CT 5 CX 42 CX 43 CZ 8 DT 1 to DT 15 and DT 17 to DT 19 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 FA 6 to FA 11 sections FZ 2 to FZ 4 When subsection (30) does not apply
31: Subsection (30) does not apply if another party to the lease is a New Zealand resident, a CFC, or a FIF for which the taxpayer uses the attributable FIF income method. Taxable distributions from non-complying trust
32: If the CFC gets a taxable distribution from a non-complying trust—
a: section HC 22
b: the taxable distribution is not taken into account in calculating the CFC’s net attributable CFC income or loss
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 34
b: the CFC’s FIF income or loss is not taken into account in calculating the net attributable CFC income
c: section EX 58 Transitional treatment of cross-border reinsurance
34: Section CZ 12 Disclosure restrictions on grey list CFCs
35: absolute value accounting period adjusted tax value amount annual gross income arrangement associated person attributable CFC amount attributable FIF income method attributed CFC income attributed CFC loss attributing interest 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 loss mineral net attributable CFC income net attributable CFC loss net income net loss New Zealand New Zealand resident non-attributing active CFC non-complying trust non-resident output tax pay petroleum request resident in New Zealand share shareholder specified lease tax taxable distribution trading stock variable principal debt instrument 2004 No 35 s EX 21 Section EX 21 heading amended 6 October 2009 section 161(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(1) heading substituted 6 October 2009 section 161(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(1) substituted 6 October 2009 section 161(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(1B) heading inserted 6 October 2009 section 161(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(1B) inserted 6 October 2009 section 161(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(2) substituted 6 October 2009 section 161(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(5) amended 6 October 2009 section 161(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(7) amended 6 October 2009 section 161(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(13)(c) replaced 24 February 2016 section 139(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 21(13)(db) inserted 6 October 2009 section 161(6) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(13)(dc) inserted 6 October 2009 section 161(6) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(13)(f) amended 17 July 2013 section 51(a) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EX 21(13)(f) amended 17 July 2013 section 51(b) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EX 21(13)(j) amended 30 March 2021 section 51(1) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EX 21(14)(a) amended 1 April 2018 section 83(1) section 83(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EX 21(15) amended 1 April 2010 section 161(8) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(15) amended 6 October 2009 section 161(7) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(16) heading substituted 6 October 2009 section 161(9) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(16) substituted 6 October 2009 section 161(9) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(17) heading repealed 6 October 2009 section 161(9) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(17) repealed 6 October 2009 section 161(9) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(20) heading repealed 29 March 2025 section 51 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section EX 21(20) repealed 29 March 2025 section 51 Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section EX 21(24)(b) substituted 6 October 2009 section 161(10) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(26) amended 30 March 2021 section 51(2) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EX 21(26) amended 7 December 2009 section 26(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 21(26) amended 6 October 2009 section 161(11)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(26) amended 6 October 2009 section 161(11)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(28) amended 1 April 2014 section 52 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 Section EX 21(29) amended 1 April 2018 section 83(2) section 83(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EX 21(31) replaced 7 May 2012 section 23(1) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 21(32)(b) amended 6 October 2009 section 161(12) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(33)(b) amended 6 October 2009 section 161(13) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(35) heading repealed 6 October 2009 section 161(14) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21(35) repealed 6 October 2009 section 161(14) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21 list of defined terms 1973 version provisions repealed 1 April 2010 section 594 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21 list of defined terms 1988 version provisions repealed 1 April 2010 section 594 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21 list of defined terms 1990 version provisions repealed 1 April 2010 section 594 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21 list of defined terms annual gross income inserted 6 October 2009 section 161(16)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21 list of defined terms attributable CFC amount inserted 6 October 2009 section 161(16)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21 list of defined terms attributable FIF income method inserted 7 May 2012 section 23(2) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 21 list of defined terms attributed repatriation repealed 24 February 2016 section 139(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 21 list of defined terms branch equivalent income repealed 6 October 2009 section 161(16)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21 list of defined terms life insurance rules repealed 30 March 2021 section 51(3) Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 Section EX 21 list of defined terms net attributable CFC income inserted 6 October 2009 section 161(16)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21 list of defined terms net attributable CFC loss inserted 6 October 2009 section 161(16)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21 list of defined terms non-attributing active CFC inserted 6 October 2009 section 161(16)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21 list of defined terms request inserted 2 June 2016 section 74 Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 Non-attributing active CFCs Heading inserted 6 October 2009 section 162(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 21B: Non-attributing active CFCs
Non-attributing active CFC
1: Non-attributing active CFC interest holder
a: for which the interest holder is not affected by an election under section EX 73
b: that meets the requirements of subsection (2) or (3), alone or as part of a test group of companies under section EX 21D EX 21E CFC meeting test in section EX 21D or EX 21E
2: A CFC is a non-attributing active CFC—
a: under section EX 21D
b: under section EX 21E
i: the CFC meets the requirements of section EX 21C section EX 21E
ii: the person chooses to use the applicable accounting standard in applying section EX 21E
iii: the CFC meets the requirements of section EX 21E Insurer meeting requirements of determination
3: A CFC that is an insurer meeting the requirements of a determination made by the Commissioner under section 91AAQ Single test for each CFC
4: In determining whether CFCs are non-attributing active CFCs for an accounting period under a test in section EX 21D EX 21E , or a member of a wholly-owned group to which the person belongs, Part-period calculations
5: Section EX 21F accounting period CFC group of companies income interest non-attributing active CFC Section EX 21B inserted 6 October 2009 section 162(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21B(1) replaced 2 November 2012 section 44(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 21B(2)(b) amended 29 March 2018 section 84(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EX 21B(2)(b)(i) amended 29 March 2018 section 84(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EX 21B(2)(b)(ii) amended 29 March 2018 section 84(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EX 21B(2)(b)(iii) amended 29 March 2018 section 84(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EX 21B(4) heading inserted 7 May 2012 section 24(1) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 21B(4) inserted 7 May 2012 section 24(1) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 21B(4) amended 30 June 2014 section 89 Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21B(5) heading inserted 29 March 2018 section 84(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EX 21B(5) inserted 29 March 2018 section 84(2) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Section EX 21B list of defined terms group of companies inserted 2 November 2012 section 44(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EX 21B list of defined terms income interest inserted 29 March 2018 section 84(3) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Tests for non-attributing active CFCs Heading inserted 6 October 2009 section 162(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 21C: Applicable accounting standards for section EX 21E
Applicable accounting standards
1: In applying EX 21E interest holder applicable accounting standard subsections (2) to (5) and section EZ 32F section GB 15C Generally accepted accounting practice with IFRS for CFC
2: The interest holder may use generally accepted accounting practice in New Zealand including IFRSs and the framework for differential reporting for entities applying the New Zealand equivalents to the international financial standards reporting regime (the generally accepted accounting practice with IFRS
a: include the accounts of the CFC; and
b: comply with generally accepted accounting practice with IFRS; and
c: meet the audit requirements of subsection (8). Generally accepted accounting practice with IFRS for test group
3: The interest holder may use generally accepted accounting practice with IFRS for the CFC's test group under section EX 21E(2)
a: include the accounts of the members of the test group; and
b: comply with generally accepted accounting practice with IFRS; and
c: meet the audit requirements of subsection (8). IFRSEs for CFC
4: The interest holder may use IFRSEs for the CFC, if the interest holder or another person has accounts that—
a: include the accounts of the CFC; and
b: comply with the relevant IFRSEs; and
c: meet the audit requirements of subsection (8). IFRSEs for test group
5: The interest holder may use IFRSEs for the CFC's test group under section EX 21E(2)
a: include the accounts of the members of the test group; and
b: comply with the relevant IFRSEs; and
c: meet the audit requirements of subsection (8). Generally accepted accounting practice without IFRS for CFC
6: Generally accepted accounting practice without IFRS for CFC's test group
7: Audit requirements
8: Accounts meet the audit requirements of this subsection if they—
a: are audited by an accountant who is—
i: a chartered accountant or an accountant of equivalent professional standard in the country in which the accounts are prepared; and
ii: independent of the CFC and the person; and
b: are given an unqualified opinion or an opinion of equivalent standard in the country in which the accounts are prepared. Compliance with accounting standards
9: For the purposes of subsections (2) to (5) and section EZ 32F
a: the accounts state that they comply with the accounting standard; and
b: the accounts meet the audit requirements of subsection (8); and
c: the Commissioner does not have reasonable grounds to suspect—
i: fraudulent activity by the interest holder, the CFC, a company in the CFC's test group, or the auditor:
ii: preparation of the accounts with an intent to mislead:
iii: incompetence of the auditor. accounting period annual gross income associated attributable CFC amount CFC company generally accepted accounting practice IFRS IFRSE insurer New Zealand resident non-attributing active CFC rent royalty Section EX 21C inserted 6 October 2009 section 162(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21C(1) amended 1 April 2014 section 93(1) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21C(6) heading repealed 1 April 2014 section 93(2) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21C(6) repealed 1 April 2014 section 93(2) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21C(7) heading repealed 1 April 2014 section 93(2) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21C(7) repealed 1 April 2014 section 93(2) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21C(9) amended 1 April 2014 section 93(3) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21C(9)(c)(i) replaced 7 May 2012 section 25(1) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 21C list of defined terms company inserted 7 May 2012 section 25(2) Taxation (International Investment and Remedial Matters) Act 2012
EX 21D: Non-attributing active CFC: default test
CFC as part of test group
1: A person (the interest holder test group
a: each of which is subject to the laws of the same country or territory and—
i: has a taxed CFC connection with the country or territory:
ii: would be a non-attributing active CFC if not treated as part of a test group and would have a taxed CFC connection with the country or territory in the absence of paragraph (c) of the definition of taxed CFC connection
b: in each of which an income interest of more than 50% is held by—
i: the interest holder:
ii: companies that are all members of a wholly-owned group of companies that includes the interest holder; and
c: each of which is required to use the same currency under section EX 21(4)
d: that are consolidated for the purposes of this section—
i: using like tax treatments for like transactions and for other events in similar circumstances; and
ii: eliminating in full all balances, transactions, income, and expenses arising between members of the test group. CFC as part of test group for part of accounting period
1B: An interest holder who acquires, or disposes of, an interest in a CFC (the first CFC
a: the CFCs in the test group are all acquired, or all disposed of, in the accounting period by the interest holder or by members (the wholly-owned members
b: for the period in the accounting period in which the interest holder holds the interest in the first CFC, the interest holder or the wholly-owned members hold an income interest under section EX 17
c: the interest holder, or the wholly-owned members, own the first CFC and each other CFC in the test group—
i: at the beginning of the accounting period; or
ii: at the end of the accounting period; and
d: the requirements of subsection (1)(a), (c), and (d) are met. Threshold ratio
2: A CFC is a non-attributing active CFC under section EX 21B(2)(a)
a: is less than 0.05; and
b: is not zero under subsection (3)(f). Application of formula
3: In using the formula in subsection (4)—
a: each item in the formula is determined—
i: for the CFC's consolidated test group, if the interest holder chooses to apply the formula to the test group; or
ii: for the CFC, if subparagraph (i) does not apply; and
b: each item in the formula is determined for a test group after amounts included in the item are adjusted to remove amounts corresponding to income interests not held by the interest holder; and
c: a reference to a company that is associated is treated as being a reference to a company that is—
i: associated with a member of the CFC's test group, although not a member of the CFC's test group, if the interest holder chooses to apply the formula to the test group; or
ii: associated with the CFC, if subparagraph (i) does not apply; and
d: a reference to a company that is in the same group of companies is treated as being a reference to a company that is—
i: in the same group of companies as a member of the CFC's test group, although not a member of the CFC's test group, if the interest holder chooses to apply the formula to the test group; or
ii: in the same group of companies as the CFC, if subparagraph (i) does not apply; and
e: a numerator or denominator that is a negative number is treated as being zero; and
f: the amount calculated using the formula is zero if the denominator is zero. Formula
4: The amount that determines whether the CFC is a non-attributing active CFC is calculated using the formula— (attributable − attributable adjustments) ÷ (gross − gross adjustments). Definition of items in formula
5: The items in the formula are defined in subsections (6) to (9). Attributable
6: Attributable Attributable adjustments
7: Attributable adjustments item attributable
a: if the interest holder chooses that this paragraph apply, income derived from the supply of personal services—
i: included in an attributable CFC amount under section EX 20B(3)(h)
ii: not included in an attributable CFC amount under another paragraph of section EX 20B(3) and (4)
b: if the interest holder chooses that this paragraph apply, the cost of revenue account property producing an amount (the included amount section EX 20B(3)(k) not exceeding the included amount, to which
i: the cost is treated as a deduction of the CFC in the accounting period; and
ii: the deduction exceeds the amount of any income under subpart CH Gross
8: Gross subpart CQ Gross adjustments
9: Gross adjustments
a: the amount of the item attributable adjustments
b: expenditure or loss that is included in the calculation of the attributable CFC amount under section EX 20B
c: income derived from a company that would meet the requirements of subsection (1)(a) to (c) for a member of a test group with the CFC:
cb: income that is derived from a fixed establishment by a member of the test group and is not an attributable CFC amount, if the member is included in the test group under subsection (1)(a)(ii):
d: income from a supply that meets the requirements of section GB 15B accounting period annual gross income associated non-attributing active CFC attributable CFC amount CFC company fixed establishment group of companies income interest non-attributing active CFC resident in New Zealand royalty taxed CFC connection wholly-owned group of companies Section EX 21D inserted 6 October 2009 section 162(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21D(1)(a) replaced 30 June 2014 section 90(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21D(1)(b) replaced 30 June 2014 section 90(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21D(1B) heading inserted 24 February 2016 section 140(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 21D(1B) inserted 24 February 2016 section 140(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 21D(7) amended 7 September 2010 section 44 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EX 21D(7)(b) amended 7 December 2009 section 27(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 21D(9)(cb) inserted 30 June 2014 section 90(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21D list of defined terms fixed establishment inserted 30 June 2014 section 90(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21D list of defined terms taxed CFC connection inserted 7 May 2012 section 26(2) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 21D list of defined terms wholly-owned group companies inserted 30 June 2014 section 90(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
EX 21E: Non-attributing active CFC: test based on accounting standard
Applicable accounting standard
1: A person (the interest holder applicable accounting standard section EX 21C CFC as part of test group
2: The interest holder may choose to apply this section for the CFC as a member of a group (a test group
a: the group consists of companies required under the applicable accounting standard to consolidate, whether or not with companies that are not in the group; and
b: each company is subject to the laws of the same country or territory and—
i: has a taxed CFC connection with the country or territory:
ii: would be a non-attributing active CFC if not treated as part of a test group and would have a taxed CFC connection with the country or territory in the absence of paragraph (c) of the definition of taxed CFC connection
c: an income interest of more than 50% is held in each company by—
i: the interest holder:
ii: companies that are all members of a wholly-owned group of companies that includes the interest holder; and
d: each company has the same functional currency; and
e: there are audited and consolidated financial statements that—
i: include the accounts of the companies in the group, whether or not with accounts of companies that are not in the group; and
ii: comply with the applicable accounting standard. CFC as part of test group for part of accounting period
2B: An interest holder who acquires, or disposes of, an interest in a CFC (the first CFC
a: the CFCs in the test group are all acquired, or all disposed of, in the accounting period by the interest holder or by members (the wholly-owned members
b: for the period in the accounting period in which the interest holder holds the interest in the first CFC, the interest holder or the wholly-owned members hold an income interest under section EX 17
c: the interest holder, or the wholly-owned members, own the first CFC and each other CFC in the test group—
i: at the beginning of the accounting period; or
ii: at the end of the accounting period; and
d: the requirements of subsection (2)(a), (b), (d), and (e) are met. Threshold ratio
3: A CFC is a non-attributing active CFC under section EX 21B(2)(b)
a: the amount calculated using the formula in subsection (5) is less than 0.05; and
b:
c: the amount calculated using the denominator in the formula in subsection (5) is more than zero. Application of formula
4: In using the formula in subsection (5),—
a: each item in the formula is—
i: determined under the applicable accounting standard; and
ii: adjusted so that no amount is included in the item more than once; and
b: each item in the formula is determined—
i: from amounts consolidated for the CFC's test group under the applicable accounting standard, if the interest holder chooses to apply the formula to the test group; or
ii: from amounts for the CFC, if subparagraph (i) does not apply; and
c: each item in the formula is determined after adjustment of amounts included in the item by removing amounts corresponding to minority interests not held by the interest holder; and
d: a reference to a company that is associated is treated as being a reference to a company that is—
i: associated with a member of the CFC's test group, although not a member of the CFC's test group, if the interest holder chooses to apply the formula to the test group; or
ii: associated with the CFC, if subparagraph (i) does not apply; and
e: a reference to a company that is in the same group of companies is treated as being a reference to a company that is—
i: in the same group of companies as a member of the CFC's test group, although not a member of the CFC's test group, if the person chooses to apply the formula to the test group; or
ii: in the same group of companies as the CFC, if subparagraph (i) does not apply; and
f: amounts determined for a CFC other than as part of a test group are—
i: determined in the functional currency of the CFC; and
ii: converted between currencies under the applicable accounting standard, but ignoring exchange differences arising on a monetary item that forms part of a net investment of the CFC in a foreign operation; and
g: amounts determined for a test group are—
i: converted from the functional currency of the CFC to the presentation currency of the consolidated accounts for the test group using the average conversion rate for the accounting period; and
ii: otherwise converted between currencies under the applicable accounting standard; and
h: a numerator that is a negative number is treated as being zero. Formula
5: The amount that determines whether the CFC is a non-attributing active CFC is calculated using the formula— (reported passive + added passive − removed passive) Definition of items in formula
6: The items in the formula are defined in subsections (7) to (12). Reported passive
7: Reported passive
a: income from a dividend:
b: income from interest:
c: income from a royalty:
d: income from rent:
e: income, other than rent or interest, from a finance lease or operating lease:
f: income or loss from a financial asset, other than a derivative as defined in IFRS 9
i: a change in the reported fair value of the asset:
ii: a gain or loss on the derecognition, as defined in IFRS 9
iii:
fb: a foreign exchange gain or loss on—
i: a financial asset other than a derivative as defined in IFRS 9
ii: a financial asset or financial liability other than a derivative as defined in IFRS 9
g: income or loss from a derivative instrument, as defined in IFRS 9
i: if the instrument is held in the course of a business of the CFC for the purpose of dealing with the derivative instrument:
ii: if the instrument is not entered in the ordinary course of a business of the CFC:
iii: to the extent to which the income IFRS 9
h: income or gains from a business of insurance, including income or gains from property used to back insurance assets. Added passive
8: Added passive reported passive
a: income from a life insurance policy that is included in the attributable CFC amount for the accounting period under section EX 20B(3)(g)
b: income from the disposal of revenue account property that is included in the attributable CFC amount for the accounting period under section EX 20B(3)(k)
i: not a share, financial arrangement, or life insurance policy; and
ii: used by the CFC in a way giving rise to income or gains that increase the numerator of the formula in subsection (5):
c: income from a supply of services performed in New Zealand that is included in the attributable CFC amount for the accounting period under section EX 20B(3)(l)
d: income from a supply of telecommunications services that is included in the attributable CFC amount for the accounting period under section EX 20B(3)(m)
e: attributed PIE income that is included in the attributable CFC amount for the accounting period under section EX 20B(3)(o) Removed passive
9: Removed passive reported passive added passive
a: a dividend that is not included in the attributable CFC amount for the accounting period under section EX 20B(3)(a) to (c)
b: a royalty that would be included in the attributable CFC amount for the accounting period but for section EX 20B(5)(a) to (d)
c: rent that would be included in the attributable CFC amount for the accounting period but for section EX 20B(7)(a) to (c)
cb: gain or loss from a financial asset or financial liability section EX 20B(12)
d: the cost of revenue account property producing an amount (the included amount section EX 20B(3)(k) not exceeding the included amount, to which
i: the cost would be a deduction of the CFC in the accounting period if the CFC were a resident of New Zealand; and
ii: the deduction would exceed the amount of any income arising under subpart CH Reported revenue
10: Reported revenue
a: included under the applicable accounting standard in—
i: operating revenue, if the applicable accounting standard is former
ii: revenue, if subparagraph (i) does not apply:
ab: income from rent:
b: income, other than rent, from a finance lease or operating lease:
c: a gain or loss on a financial asset, other than a derivative as defined in IFRS 9
i: a change in the reported fair value of the asset:
ii: a gain or loss on the derecognition, as defined in IFRS 9
iii:
cb: a foreign exchange gain or loss on—
i: a financial asset other than a derivative as defined in IFRS 9
ii: a financial asset or financial liability other than a derivative as defined in IFRS 9
d: a gain or loss from a derivative instrument, as defined in IFRS 9
i: if the derivative instrument is held in the course of a business of the CFC for the purpose of dealing with the derivative instrument:
ii: if the derivative instrument is not entered in the ordinary course of a business of the CFC:
iii: to the extent to which the gain IFRS 9
e: income or a gain from a business of insurance, including from property used to back insurance assets, if the applicable accounting standard is not former Added revenue
11: Added revenue reported revenue
a: income from a life insurance policy that is included in the attributable CFC amount for the accounting period under section EX 20B(3)(g)
b: income from the disposal of revenue account property that is included in the attributable CFC amount for the accounting period under section EX 20B(3)(k)
i: not a share, financial arrangement, or life insurance policy; and
ii: used by the CFC in a way giving rise to income or gains that increase the numerator of the formula in subsection (5). Removed revenue
12: Removed revenue
a: an amount included in the item removed passive under subsection (9)(d):
b: a dividend to the extent to which it is included in the item removed passive, under subsection (9)(a):
c: income from a supply of personal services that is included in the item reported revenue, and in the attributable CFC amount for the accounting period under section EX 20B(3)(h)
d: income or loss from a share that is not revenue account property under this Act in the form of—
i: a change in the reported fair value of the share:
ii: income or loss on the derecognition, as defined in IFRS 9
iii: a foreign exchange gain or loss on the share:
db: income that is derived from a fixed establishment by a member of the test group and is not an attributable CFC amount, if the member is included in the test group under subsection (2)(b)(ii):
e: income derived from another CFC that—
i: is subject to the laws of the country or territory under which the CFC is liable to income tax on the CFC's income because of the CFC's domicile, residence, place of incorporation, or centre of management; and
ii: is liable to tax on its income in that country or territory because of its domicile, residence, place of incorporation, or centre of management; and
iii: could be consolidated with the CFC for the purposes of this section if appropriate audited accounts were prepared:
f: if the applicable standard is former
i: a reduction in the liability:
ii: a gain on the disposal or other derecognition of the liability:
iii: a foreign exchange gain on the liability:
g: if the applicable standard is former section YA 1
i: an increase in the fair value of the asset:
ii: a gain on the disposal of the asset:
iii: a foreign exchange gain on the asset. Compliance with accounting standards
13: If accounts meet the requirements of section EX 21C
a: the accounts are treated as complying with the relevant accounting standard for the purposes of subsection (2):
b: amounts drawn from the accounts, or from information that is used to prepare the accounts and is consistent with them, are treated as complying with the relevant accounting standard for the purposes of subsection (4) if the Commissioner does not have reasonable grounds to suspect—
i: fraudulent activity by the interest holder, the CFC, a CFC in the CFC's test group, or the auditor:
ii: preparation of the accounts with an intent to mislead:
iii: incompetence of the auditor. accounting period associated non-attributing active CFC attributable CFC amount CFC company dividend finance lease financial arrangement financial asset financial liability fixed establishment former generally accepted accounting practice without IFRS group of companies IFRS IFRS 9 income life insurance policy non-attributing active CFC operating lease premium revenue account property royalty taxed CFC connection wholly-owned group of companies Section EX 21E inserted 6 October 2009 section 162(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 21E(2)(b) replaced 30 June 2014 section 91(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(2)(c) replaced section 91(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(2B) heading inserted 24 February 2016 section 141(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 21E(2B) inserted 24 February 2016 section 141(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 21E(3)(b) repealed section 91(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(4)(g)(ii) amended section 91(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(4)(h) inserted section 91(5) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(7)(f) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(7)(f)(ii) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(7)(f)(iii) repealed section 91(6) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(7)(fb) inserted section 91(7) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(7)(fb)(i) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(7)(fb)(ii) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(7)(g) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(7)(g)(iii) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(7)(g)(iii) amended 7 December 2009 section 28(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 21E(8)(e) added 29 August 2011 section 38 Taxation (Tax Administration and Remedial Matters) Act 2011 Section EX 21E(9)(cb) inserted 7 May 2012 section 27(2) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 21E(9)(cb) amended 30 June 2014 section 91(8) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(9)(d) amended 7 December 2009 section 28(2) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 21E(10)(a)(i) amended 1 April 2014 section 94(1) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21E(10)(ab) inserted 7 May 2012 section 27(3) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 21E(10)(c) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(10)(c)(ii) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(10)(c)(iii) repealed section 91(9) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(10)(cb) inserted section 91(10) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(10)(cb)(i) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(10)(cb)(ii) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(10)(d) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(10)(d)(iii) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(10)(d)(iii) amended 7 December 2009 section 28(3) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 21E(10)(e) amended 1 April 2014 section 94(2) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21E(12)(d)(ii) amended 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E(12)(db) inserted section 91(11) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E(12)(f) amended 1 April 2014 section 94(3) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21E(12)(g) amended 1 April 2014 section 94(4) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21E list of defined terms financial asset inserted 30 June 2014 section 91(12) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E list of defined terms financial liability inserted 30 June 2014 section 91(12) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E list of defined terms fixed establishment inserted 30 June 2014 section 91(12) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 21E list of defined terms former generally accepted accounting practice without IFRS inserted 1 April 2014 section 94(5) Financial Reporting (Amendments to Other Enactments) Act 2013 Section EX 21E list of defined terms IFRS 9 inserted 26 June 2019 section 80 Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 Section EX 21E list of defined terms taxed CFC connection inserted 7 May 2012 section 27(4) Taxation (International Investment and Remedial Matters) Act 2012 Section EX 21E list of defined terms wholly-owned group of companies inserted 30 June 2014 section 91(12) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
EX 21F: Part-period calculations
When this section applies
1: This section applies for the purposes of sections EX 21B EX 21C EX 21E part-period Requirements
2: The interest holder may determine that a CFC is a non-attributing active CFC if—
a: the CFC meets the requirements of section EX 21C section EX 21E
b: the person chooses to use the applicable accounting standard in EX 21E
c: the CFC meets the requirements of section EX 21E
d: the person, or a company that is part of the person’s group of companies, holds an income interest in the CFC for the part-period. Determination for interest holders
3: A determination under subsection (2) applies for the interest holder and no other person. Alternative default method
4: If the requirements of subsection (2) are not met, the interest holder must use the default test set out in section EX 21D accounting period CFC company group of companies income interest non-attributing active CFC Section EX 21F inserted 29 March 2018 section 85 Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 Non-attributing Australian CFCs Heading substituted 6 October 2009 section 163(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 22: Non-attributing Australian CFCs
Criteria
1: A CFC is a non-attributing Australian CFC
a: at all times in the accounting period the CFC is—
i: resident in Australia; and
ii: under Australian law, subject to income tax on its income or treated as part of the head company of a consolidated group subject to income tax on its income; and
iii: treated as being resident in Australia under all agreements between the government of Australia and the governments of other countries or territories that would be a double tax agreement if between the government of New Zealand and the government of the other country or territory; and
b: the CFC's liability for income tax has not been reduced by—
i: an exemption from income tax for income derived from business activities carried on outside Australia:
ii: a special allowance, relief, or exemption with respect to offshore banking units; and
c: the CFC—
i: is not a unit trust; or
ii: is a unit trust that is subject under Australian law to income tax on its income in the same way as a company; or
iii: is a unit trust whose units are owned by an entity resident in Australia as described in paragraph (a)(iii), and either the unit holder meets the requirements of paragraph (a)(ii) or the unit trust is treated as part of the head company of a consolidated group subject under Australian law to tax on its income. No attributed CFC income or loss
2: Sections CQ 2(1)(i) DN 2(1)(i) CFCs with interest in FIF: look-through approach
3: This section does not prevent FIF income or FIF loss arising under section EX 58 accounting period attributed CFC income attributed CFC loss CFC double tax agreement FIF FIF income FIF loss income tax non-attributing Australian CFC resident in Australia Section EX 22 substituted 6 October 2009 section 163(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 22(1)(b)(ii) amended 30 June 2014 section 92(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 22(1)(c) replaced 29 March 2018 section 86(1) Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018
EX 23: Tax concession grey list CFCs
Section EX 23 repealed 6 October 2009 section 164(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Change of residence of companies
EX 24: 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 CFC attributable income or loss
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 CFC attributable income or loss unshortened period CFC attributable income or loss accounting period attributed CFC income CFC company foreign company loss New Zealand 2004 No 35 s EX 25 Section EX 24(3) amended 24 February 2016 section 142(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 24(4) amended 24 February 2016 section 142(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 24(4) formula amended 24 February 2016 section 142(3) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 24 list of defined terms branch equivalent income repealed 24 February 2016 section 142(4) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Change of CFC’s balance date
EX 25: Change of CFC’s balance date
Application of this section
1: This section applies when a person—
a: has an income interest in a CFC; and
b: has calculated attributed CFC income or loss old accounting year
c: wants to change to use a different accounting year (the new accounting year 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 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 accounting year amount attributed CFC income business CFC Commissioner group of companies income interest income tax income year loss 2004 No 35 s EX 26 Section EX 25(1)(b) amended 24 February 2016 section 143(1) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section EX 25(3)(d) substituted 6 October 2009 section 165(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 25(3)(d) amended 24 February 2016 section 143(2) Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section E