Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698841817047.pdf (New Zealand)
Deﬁned in this Act: amount, deduction, income year, lease, pay, premium, tax year, term of the lease Compare: 2004 No 35 s EZ 6 Depreciation EZ 9 Pool method for items accounted for by globo method for 1992–93 income year If a person chooses the pool method for an item of property of a kind described in section EE 66(3)(c) (Meaning of poolable property), they must also choose to treat as a single pool all such items of property they still own that they accounted for at the end of their 1992–93 income year within the same globo account.
Deﬁned in this Act: income year, pool, pool method Compare: 2004 No 35 s EZ 8 1142 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 11 EZ 10 Pool items accounted for by globo method for 1992–93 income year (1) (2) Limit on amount of income If a person’s pool consists solely of items of depreciable prop- erty accounted for at the end of the person’s 1992–93 income year using, with the Commissioner’s permission, the globo accounting method, the amount of income under section EE 22(5)(a) (Cases affecting pool) is no more than the amount calculated using the formula— depreciation allowed - income.
Deﬁnition of items in formula In the formula,— (a) depreciation allowed is the total of deductions for amounts of depreciation loss that the person has been allowed in all earlier income years for all items in the pool, including amounts allowed before the person’s 1993–94 income year under the globo accounting method: income is all amounts of income under section EE 22(5)(a) in all previous income years.
(b) Deﬁned in this Act: amount, Commissioner, depreciable property, depreciation loss, income year, pool Compare: 2004 No 35 s EZ 9 EZ 11 Amounts of depreciation recovery income and depreciation loss for part business use up to 2004–05 income year the purposes of sections EE 49(1)(b)(ii) and EE For 50(5)(b)(ii) (which relate to depreciation for partial in- come-producing use), the item is an item of property to which 1 or more of the following applies: (a) the item is, at any time during the period the person owns it, subject to section FB 7 of the Income Tax Act 2004: the item is, at any time during the period the person owns it, subject to section EG 2(1)(d) or (e) of the In- come Tax Act 1994: (b) 1143 Part E s EZ 12 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) (d) the item is, at any time during the period the person owns it, subject to section 108A(1)(d) or (e) of the In- come Tax Act 1976: the item was, in the 1992–93 income year or an earlier income year, an item that the person did not use wholly in deriving assessable income or carrying on a business for the purpose of deriving assessable income and for which, consequently, the person was allowed a smaller deduction for depreciation under section 108 of the In- come Tax Act 1976 than they would have been allowed if they had used the item wholly for 1 of those purposes.
Deﬁned in this Act: assessable income, business, income year Compare: 2004 No 35 s EZ 10 EZ 12 Amount of depreciation loss for item acquired from associated person on or before 23 September 1997 (1) (2) When this section applies This section applies when, on or before 23 September 1997, a person (person A) acquires an item from an associated person entitled to a deduction for an amount of depreciation loss for it.
Exclusions This section does not apply— (a) (b) (c) if the item is acquired under a relationship agreement in circumstances to which section FB 21 (Depreciable property) applies; or if the item is listed in schedule 14 (Depreciable intan- gible property) and the price that person A pays is in- come of the associated person; or if the item is not listed in schedule 14 and the Com- missioner is of the opinion that the circumstances are such that a person should be allowed a deduction for an amount of depreciation loss for the item based on the actual price or other consideration given for it.
No greater amount of depreciation loss (3) Whether or not the associated person has been allowed a de- duction for an amount of depreciation loss, person A does not have a greater amount of depreciation loss for the item than 1144 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 13 (4) (5) (6) that which the associated person would have had if the asso- ciated person had kept the item.
Amount of depreciation loss dealt with under section EE 48 If the associated person has an amount of depreciation loss that has been dealt with under section EE 48 (Effect of disposal or event), person A has an amount of depreciation loss for the item based on the total of— (a) (b) all amounts dealt with under section EE 48; and the depreciated value of the item immediately before person A acquired it.
When subsection (6) applies and does not apply Subsection (6) applies when, on or before 23 September 1997, the holder of management rights created under the Radiocommunications Act 1989 grants a licence right under that Act to an associated person.

However, it does not apply when the Crown acting by and through the Secretary of Commerce is named as the manager under section 11(1) of the Radiocommunications Act 1989.
Licence right price The price of the licence right is treated as being zero for the purposes of subpart EE (Depreciation).
Deﬁned in this Act: amount, associated person, Commissioner, depreciation loss, pay, relationship agreement Compare: 2004 No 35 s EZ 11 EZ 13 Annual rate for item acquired on or after 1 April 1993 and before end of person’s 1994–95 income year (1) (2) What this section is about This section is about the annual rate that applies to an item of depreciable property that a person acquires before the end of their 1994–95 income year (not including ﬁxed life intangible property or excluded depreciable property, for which rates are set in sections EE 33 (Annual rate for ﬁxed life intangible property) and EZ 15 respectively).
Rate The rate is— (a) the item’s economic rate; or 1145 Part E s EZ 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the pre-1993 depreciation rate described in section EZ 14, if the person chooses it under that section.
Deﬁned in this Act: annual rate, depreciable property, economic rate, excluded depreciable property, ﬁxed life intangible property, income year Compare: 2004 No 35 s EZ 12 EZ 14 Pre-1993 depreciation rate Scope of election A person may choose the pre-1993 depreciation rate for all items, or any item, that they acquire before the end of their 1994–95 income year.
How election made The election is made by applying the pre-1993 depreciation rate for the item to the item in the person’s return of income for the income year for which the election is made.

Election unchangeable The election must not be changed for the income year for which it is made.
Moving from diminishing value to straight-line and vice versa A person who chooses the pre-1993 depreciation rate has the following choices: (a) if the rate is a diminishing value rate, the person may instead use the straight-line rate by— (i) rounding the diminishing value rate to the nearest rate speciﬁed in schedule 10, column 1 (Straight- line equivalents of diminishing value rates of de- preciation); and taking the equivalent straight-line rate speciﬁed in column 2 of the schedule; or (ii) (b) if the rate is a straight-line rate, the person may instead use the diminishing value rate by— (i) rounding the straight-line rate to the nearest rate speciﬁed in schedule 10, column 2; and taking the equivalent diminishing value rate spe- ciﬁed in column 1 of the schedule.
(ii) Pre-1993 depreciation rate The pre-1993 depreciation rate is the rate calculated using the formula— (1) (2) (3) (4) (5) 1146 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 15 (6) (7) (8) (9) section 108 rate + section 108A rate + section 113A rate.

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (7) to (9).
Section 108 rate Section 108 rate is the rate of depreciation that the Commis- sioner allowed persons with a standard balance date to use for the 1992–93 tax year to calculate a deduction for depreciation under section 108 of the Income Tax Act 1976, as in force for the 1992–93 tax year, for property of the same kind as the item.
Section 108A rate Section 108A rate is the rate of additional deduction under section 108A of the Income Tax Act 1976, as in force for the 1992–93 tax year, for which the item was eligible for the 1992–93 tax year.

Section 113A rate Section 113A rate is the rate of supplementary deduction under section 113A of the Income Tax Act 1976 for which the item was eligible for the 1992–93 tax year.
Deﬁned in this Act: Commissioner, diminishing value rate, income year, return of income, standard balance date, straight-line rate, tax year Compare: 2004 No 35 s EZ 13 EZ 15 Annual rate for excluded depreciable property: 1992–93 tax year (1) (2) (3) What this section is about This section is about the annual rate that applies to an item of excluded depreciable property.

Rate The rate is the section 108 rate, without adding the section 108A rate or the other sections rate.
The rates referred to in this subsection are described in subsections (3) to (5).

Section 108 rate Section 108 rate means the rate of depreciation that the Com- missioner allowed persons with a standard balance date to use for the 1992–93 tax year to calculate a deduction for depre- ciation under section 108 of the Income Tax Act 1976, as in 1147 Part E s EZ 15 Income Tax Act 2007 Reprinted as at 1 January 2010 force for the 1992–93 tax year, for property of the same kind as the item.
Section 108A rate Section 108A rate means the rate of additional deduction under section 108A of the Income Tax Act 1976, as in force for the 1992–93 tax year, for which the item was eligible for the 1992–93 tax year.

Other sections rate Other sections rate means a rate of additional or supplemen- tary deduction under section 113A or any other provision of the Income Tax Act 1976 for which the item was eligible for the 1992–93 tax year.
Amount of depreciation loss under any other provision If a person has an additional amount of depreciation loss for an income year for an item of excluded depreciable property under section EZ 16 or EZ 17 or any other provision of this Act,— (a) the rate applicable to the item under subsection (2) may be adjusted to incorporate the additional amount of de- preciation loss in a manner prescribed or allowed by the Commissioner; and when an adjusted rate is applied to the item, the person does not have a separate amount of depreciation loss for the item under section EZ 16 or EZ 17 or the other provision.
(b) Changing rate A person applying the rate in subsection (2) has the following choices: (a) if the rate is a diminishing value rate, the person may instead use the straight-line rate by— (i) rounding the diminishing value rate to the nearest rate speciﬁed in schedule 10, column 1 (Straight- line equivalents of diminishing value rates of de- preciation); and taking the equivalent straight-line rate speciﬁed in column 2 of the schedule; or (ii) (b) if the rate is a straight-line rate, the person may instead use the diminishing value rate by— (4) (5) (6) (7) 1148 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 16 (i) (ii) rounding the straight-line rate to the nearest rate speciﬁed in schedule 10, column 2; and taking the equivalent diminishing value rate spe- ciﬁed in column 1 of the schedule.
Deﬁned in this Act: annual rate, Commissioner, depreciation loss, diminishing value rate, excluded depreciable property, prescribed, standard balance date, straight-line rate, tax year Compare: 2004 No 35 s EZ 14 EZ 16 Amount of depreciation loss for plant or machinery additional to section EZ 15 amount (1) (2) When this section applies This section applies when a person carrying on a business in New Zealand incurs, wholly for the purpose of the business, capital expenditure in acquiring, installing, or extending plant or machinery that— (a) (b) is excluded depreciable property; and is— (i) plant or machinery that is normally in operation for an average of at least 16 hours each working day and is not normally in operation for 24 hours each working day: plant or machinery that is normally in operation for 24 hours each working day.
(ii) Exclusions This section does not apply to— (a) (b) (c) (d) (e) aluminium smelting plant or machinery: cars: petroleum reﬁning plant or machinery: ships, aircraft, or hovercraft: plant or machinery for which a deduction by way of a ﬁxed rate was denied under section 108 of the Income Tax Act 1976 for the 1992–93 income year or an earlier relevant income year: plant or machinery for which the Commissioner did not prescribe a differential rate for more than 1 shift operation when determining under section 108 of the Income Tax Act 1976 the rate of depreciation for the 1992–93 income year or an earlier relevant income year.
(f) 1149 Part E s EZ 17 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) Additional amount of depreciation loss The person has an amount of depreciation loss for the plant or machinery under this section in addition to any amounts of depreciation loss that they have for the plant or machinery under section EZ 15.
Relevant income years The person has the additional amount of depreciation loss in the ﬁrst, second, third, fourth, and ﬁfth income years in which the plant or machinery is used in deriving assessable income.
Rate The rate of the additional amount of depreciation loss is,— (a) for plant or machinery described in subsection (1)(b)(i), 3% of the diminishing value of the plant or machinery in each income year: for plant or machinery described in subsection (1)(b)(ii), 6% of the diminishing value of the plant or machinery in each income year.
(b) Deﬁned in this Act: amount, assessable income, business, car, Commissioner, depreciation loss, excluded depreciable property, income year, New Zealand, petroleum, working day Compare: 2004 No 35 s EZ 15 EZ 17 Additional amount of depreciation loss: between 16 December 1991 and 1 April 1994 When this section applies This section applies when a person incurs expenditure of the kind described in subsection (2) in— (a) (b) the acquisition or installation of a qualifying asset; or the making of a qualifying improvement to an item the person owns.
Expenditure described The expenditure is expenditure of a capital nature, excluding any amount of input tax applying to the supply of the qualify- ing asset or qualifying improvement to the person.
Additional amount of depreciation loss The person has an amount of depreciation loss for the asset or item under this section in addition to any amount of depre- ciation loss they have for it under subpart EE (Depreciation) (1) (2) (3) 1150 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 18 and section EZ 16.

This subsection is overridden by section EE 48(2) (Effect of disposal or event).
(4) Amount The additional amount of depreciation loss for an income year is 25% of the lesser of— (a) the amount of depreciation loss that the person has under subpart EE and section EZ 16 for the asset or item and for the income year; and the amount of depreciation loss that the person would have had under subpart EE and section EZ 16 for the asset or item and the income year had its value been equal to its qualifying capital value.
(b) Deﬁned in this Act: acquire, amount, depreciation loss, income year, qualifying capital value, qualifying asset, qualifying improvement Compare: 2004 No 35 s EZ 16 EZ 18 Section EZ 17 amount of depreciation loss when items transferred between companies in wholly-owned group before 1 April 1993 (1) (2) (3) When this section applies This section applies when, before 1 April 1993, a company in a wholly-owned group of companies disposes of a qualifying asset, or an item to which the company has made a qualifying improvement, to another company in the same wholly-owned group.
Transferee has amount of depreciation loss The transferee company has an amount of depreciation loss under section EZ 17 for the period after the disposal as if the transferee company were the same person as the transferor company.
Amount The amount of depreciation loss that the transferor company has under section EZ 17 for the asset or item for the income year in which the disposal occurs must be subtracted when the amount of depreciation loss that the transferee company has under section EZ 17 for the income year is calculated.
1151 Part E s EZ 19 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) How deﬁnitions affected This section applies despite any limitations in the deﬁnitions of new asset, New Zealand-new asset, qualifying asset, quali- fying capital value, and qualifying improvement as to the identity of the person for whom an asset or item or improve- ment will be treated as a qualifying asset or qualifying im- provement.
Deﬁned in this Act: amount, company, depreciation loss, dispose, income year, new asset, New Zealand-new asset, qualifying asset, qualifying capital value, qualifying improvement, wholly-owned group of companies Compare: 2004 No 35 s EZ 17 EZ 19 Section EZ 17 amount of depreciation loss when person previously exempt from tax acquires item (1) (2) When this section applies This section applies when a person who has derived nothing but exempt income— (a) starts in an income year to derive income that is not exempt income; and would have had an amount of depreciation loss under section EZ 17 for an item and an income year if the per- son had been deriving income that was not exempt in- come at the time they acquired the item to which section EZ 17 applies or made a qualifying improvement to the item to which section EZ 17 applies.
(b) How qualifying capital value determined The item’s qualifying capital value is determined as if the per- son had had an amount of depreciation loss for the period dur- ing which they derived nothing but exempt income.
Deﬁned in this Act: amount, depreciation loss, exempt income, income, income year, qualifying capital value, qualifying improvement Compare: 2004 No 35 s EZ 18 EZ 20 Adjusted tax value for software acquired before 1 April 1993 What this section applies to This section applies to any of the following items for the ac- quisition of which a person was allowed a deduction before 1 April 1993: (1) 1152 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 21 (a) (b) (c) the copyright in software: the right to use the copyright in software: the right to use software.
(2) Meaning of adjusted tax value The adjusted tax value of the item is its cost to the person minus all deductions that the person was allowed for it.
Deﬁned in this Act: acquire, adjusted tax value Compare: 2004 No 35 s EZ 19 EZ 21 Sections EE 45 and EE 47: permanent removal: allowance before 1 April 1995 (1) (2) Section EE 45(11) For the purposes of section EE 45(11) (Consideration for pur- poses of section EE 44), the consideration that a person derives from the event described in subsection (2) is the item’s market value.
Two qualiﬁcations are— (a) if the person makes a taxable supply, “market value” means the market value minus any goods and services tax (GST) that would be charged on the supply; and this subsection does not apply to a transfer under a re- lationship agreement.
(b) Section EE 47(10) For the purposes of section EE 47(10) (Events for purposes of section EE 44), the ninth event is the cessation of use in New Zealand, and the taking out of New Zealand for use outside New Zealand, of an item of property for which a ﬁrst-year allowance has been granted under section 112(1) to (7) of the Income Tax Act 1976, except when the item— (a) (b) has been taken out of New Zealand temporarily; and will, after its return to New Zealand, be used in or for the purpose of a business in New Zealand.
Deﬁned in this Act: business, GST, New Zealand, relationship agreement, tax- able supply Compare: 2004 No 35 s EZ 20 1153 Part E s EZ 22 Income Tax Act 2007 Reprinted as at 1 January 2010 EZ 22 Base value and total deductions in section EE 56: before 1 April 1995 Base value in section EE 56 when section 108 of the Income Tax Act 1976 applies For the purposes of section EE 56 (Formula), this subsection applies when a person could have been allowed a deduction for depreciation for an item under section 108 of the Income Tax Act 1976 for the 1992–93 income year and they have owned the item continuously since the 1992–93 income year.
Base value is the amount at which the item was recorded in the per- son’s accounts for taxation purposes for the 1992–93 income year.
Section EE 57(3)(d) For the purposes of section EE 57(3)(d) (Base value in section EE 56 when none of sections EE 58, EE 59, and EZ 22(1) applies),— (a) the expenditure is expenditure for which a person has been allowed a deduction for depreciation under any of sections 108 to 108N or section 113A of the Income Tax Act 1976; or the expenditure is expenditure for which a person has been allowed a deduction for depreciation under any other provision of the Income Tax Act 1976.
(b) Section EE 58(1)(e)(ii) For the purposes of section EE 58(1)(e)(ii) (Base value in sec- tion EE 56 when no previous deduction), the item is one for which the person could not have been allowed a depreciation deduction under section 108 of the Income Tax Act 1976 for the 1992–93 income year.

Section EE 60(2)(c) For the purposes of section EE 60(2)(c) (Total deductions in section EE 56), the provision is section 117(5) of the Income Tax Act 1976.
Deﬁned in this Act: amount, income year Compare: 2004 No 35 s EZ 21 (1) (2) (3) (4) 1154 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 23 EZ 23 Economic rate for plant or equipment acquired before 1 April 2005 and buildings acquired before 19 May 2005 (1) (2) (3) (b) What this section is about 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 in- tangible property, or excluded depreciable property, for which an economic rate cannot be set; and the items are— (i) (ii) (iii) plant or equipment acquired before 1 April 2005: buildings acquired before 19 May 2005: 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 de- preciation rate set under this section or a corres- ponding provision.
Rate set by Commissioner The Commissioner sets the rate from time to time by— (a) (b) following the procedure set out in this section; and issuing a determination under section 91AAF of the Tax Administration Act 1994.
(b) (c) Procedure for setting economic rate To set the diminishing value rate for a kind of item of depre- ciable property, the Commissioner— (a) gets a ﬁgure by applying the formula in subsection (4) to items of that kind; and rounds the ﬁgure up or down to the nearest rate speciﬁed in schedule 12, column 1 (Old banded rates of depreci- ation); and 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) (ii) the rate calculated for each kind; and the reduction in compliance costs that is likely to be achieved.
1155 Part E s EZ 24 Income Tax Act 2007 Reprinted as at 1 January 2010 Formula The formula is— (4) (5) Deﬁnition of items in formula In the formula,— (a) residual value is the greater of— (i) estimated residual market value, which is deﬁned in section EE 67 (Other deﬁnitions): 13.5% of cost: (ii) cost is the cost of items of the kind to which the formula is applied: estimated useful life is deﬁned in section EE 63 (Meaning of estimated useful life).
(b) (c) Deﬁned in this Act: Commissioner, depreciable property, diminishing value rate, economic rate, estimated residual market value, estimated useful life, ex- cluded depreciable property, ﬁxed life intangible property Compare: 2004 No 35 s EZ 21B EZ 24 Meaning of new asset Deﬁnitions Meaning New asset means an item of property that a person owns to which subsections (2) to (4) apply and to which subsection (5) does not apply.
Acquisition date The item is— (a) acquired by the person in the period starting on 16 De- cember 1991 and ending with the close of 31 March 1993, other than under a binding contract that they en- tered into before 16 December 1991; or acquired by the person in the period starting on 1 April 1993 and ending with the close of 31 March 1994, under a binding contract that they entered into in the period starting on 16 December 1991 and ending with the close of 31 March 1993; or one to which all the following apply: (b) (c) (1) (2) 1156 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 24 (3) (4) (5) (i) (ii) (iii) it was acquired by the person before 16 Decem- ber 1991 as trading stock; and it was used by the person as a capital item for the ﬁrst time in the period starting on 16 Decem- ber 1991 and ending with the close of 31 March 1993; and it qualiﬁed for a deduction for depreciation under section 108 of the Income Tax Act 1976 in the period starting on 16 December 1991 and ending with the close of 31 March 1993.
Used before 1 April 1994 The item is used by the person before 1 April 1994.
Not used by anyone previously The item is— (a) (b) (c) (d) not acquired by any other person before the date on which the person acquired it; and not used by any other person before the date on which the person acquired it; and not held for use by any other person before the date on which the person acquired it; and not an item or part of an item that qualiﬁed for a deduc- tion for depreciation under the Income Tax Act 1976 for a period before the date on which the person acquired it.
Exclusion A constructed item that a person owns is not a new asset if— its construction started before 16 December 1991 (but (a) this paragraph does not apply to the extent to which the item is trading stock to which subsection (2)(c) applies); or its construction started on or after 16 December 1991 under a binding contract that the person entered into before 16 December 1991; or its construction was not completed before 1 April 1994; or (b) (c) 1157 Part E s EZ 25 Income Tax Act 2007 Reprinted as at 1 January 2010 (d) the item was not ﬁrst used by the person before 1 April 1994.
Deﬁned in this Act: acquire, new asset, trading stock Compare: 2004 No 35 s EZ 22 EZ 25 Meaning of New Zealand-new asset Meaning New Zealand-new asset means an item of property that a person owns to which subsections (2) to (5) apply.

Not new The item is not a new asset.
Date of acquisition The item is— (a) (b) (c) acquired by the person in the period starting on 16 De- cember 1991 and ending with the close of 31 March 1993, other than under a binding contract that they en- tered into before 16 December 1991; or acquired by the person in the period starting on 1 April 1993 and ending with the close of 31 March 1994, under a binding contract that they entered into in the period starting on 16 December 1991 and ending with the close of 31 March 1993; or one to which all the following apply: (i) it was acquired by the person before 16 Decem- ber 1991 as trading stock; and it was used by the person as a capital item for the ﬁrst time in the period starting on 16 Decem- ber 1991 and ending with the close of 31 March 1993; and it qualiﬁed for a deduction for depreciation under section 108 of the Income Tax Act 1976 in the period starting on 16 December 1991 and ending with the close of 31 March 1993.
(ii) (iii) Used before 1 April 1994 The item is used by the person before 1 April 1994.

Not used The item is— (1) (2) (3) (4) (5) 1158 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 26 (a) (b) not used in New Zealand before the date on which the person acquired it; and not an item or part of an item that qualiﬁed for a deduc- tion for depreciation under the Income Tax Act 1976 for a period before the date on which the person acquired it.
Deﬁned in this Act: acquire, new asset, New Zealand, New Zealand-new asset, trading stock Compare: 2004 No 35 s EZ 23 EZ 26 Meaning of qualifying capital value (1) (2) (3) (4) (5) Meaning Qualifying capital value means, for an income year,— (a) for a qualifying asset that a person owns, the amount calculated for the income year using the formula in sub- section (2); or for an item that a person owns that is not a qualifying asset but to which they have made a qualifying improve- ment, the amount calculated for the income year using the formula in subsection (7).
(b) Formula The formula referred to in subsection (1)(a) is— (acquisition cost + improvement cost) - item’s depreciation.

Deﬁnition of items in formula The items in the formula in subsection (2) are deﬁned in sub- sections (4) to (6).

Acquisition cost Acquisition cost is the amount of capital expenditure the per- son incurs in acquiring the asset or item.
In the case of a con- structed item, the amount of capital expenditure is reduced by the amount of capital expenditure the person incurs on the con- struction on or after 1 April 1993, other than under a binding contract that the person entered into before 1 April 1993.

Improvement cost Improvement cost is the amount of capital expenditure, if any, the person incurs in making a qualifying improvement to the asset or item.
1159 Part E s EZ 27 Income Tax Act 2007 Reprinted as at 1 January 2010 (6) (7) (8) (9) (10) Item’s depreciation Item’s depreciation is the amount of depreciation loss for which the person has been allowed a deduction for the quali- fying capital value of the asset or item in earlier income years, not including an amount of depreciation loss calculated using the straight-line method.

Formula The formula referred to in subsection (1)(b) is— capital expenditure - improvement’s depreciation.
Deﬁnition of items in formula The items in the formula in subsection (7) are deﬁned in sub- sections (9) and (10).

Capital expenditure Capital expenditure is the amount of capital expenditure the person incurs for the improvement.
Improvement’s depreciation Improvement’s depreciation is the amount of depreciation loss for which the person has been allowed a deduction for the qualifying capital value of the improvement in earlier income years, not including an amount of depreciation loss calculated using the straight-line method.
Deﬁned in this Act: acquire, amount, depreciation loss, income year, qualifying asset, qualifying capital value, qualifying improvement, straight-line method Compare: 2004 No 35 s EZ 24 EZ 27 Meaning of qualifying improvement Meaning Qualifying improvement, for a person’s income year, means an improvement of an item that the person owns, if all the following apply: (a) the person incurred the expenditure on the improve- ment— (i) in the period starting on 16 December 1991 and ending with the close of 31 March 1993, other than under a binding contract they entered into before 16 December 1991; or in the period starting on 1 April 1993 and ending with the close of 31 March 1994, under a binding (ii) (1) 1160 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 28 contract they entered into in the period starting on 16 December 1991 and ending with the close of 31 March 1993; and (b) (c) the person used the item in its improved form before 1 April 1994; and the person is allowed a deduction for depreciation under the Income Tax Act 1976 for the improvement for the income year.
(2) Exclusions Qualifying improvement does not include— an improvement to a building; or (a) an improvement requiring construction, if— (b) (i) (ii) the construction started before 16 December 1991; or the construction started on or after 16 December 1991 under a binding contract that the person en- tered into before 16 December 1991; or the construction was not completed before 1 April 1994; or the improvement was not ﬁrst used by the person before 1 April 1994.
Deﬁned in this Act: income year, qualifying improvement Compare: 2004 No 35 s EZ 25 (iii) (iv) EZ 28 Meaning of qualifying asset Qualifying asset means— (a) a new asset, other than a building, that a person owns in an income year and for which they are allowed a deduction for depreciation under the Income Tax Act 1976 for the income year; or a New Zealand-new asset, other than a building or a car, that a person owns in an income year and for which they are allowed a deduction for depreciation under the Income Tax Act 1976 for the income year.
(b) Deﬁned in this Act: car, income year, new asset, New Zealand-new asset, quali- fying asset Compare: 2004 No 35 s EZ 26 1161 Part E s EZ 29 Income Tax Act 2007 Reprinted as at 1 January 2010 Accident insurance EZ 29 Private insurers under Accident Insurance Act 1998 (1) When this section applies This section applies when an insurer, as deﬁned in paragraph (a) of the deﬁnition of insurer in section 13 of the Accident Insurance Act 1998, has a reserve in a tax year to cover the fol- lowing, all of which relate to events covered by the Accident Insurance Act 1998 occurring before the end of the tax year: claims that have been made with the insurer but have (a) not been settled before the end of the tax year; and claims that are expected to be made with the insurer in relation to events that the insurer knows about; and an estimate of claims that have not been reported to the insurer in relation to events that the insurer does not know about.
(b) (c) Adjustment to deduction (2) When the closing value of the reserve for a tax year is more than the opening value, the deduction that the insurer is al- lowed is adjusted by an amount equal to the amount calculated using the formula— closing value - opening value.
Adjustment to income (3) When the opening value of the reserve for a tax year is more than the closing value, the income of the insurer is adjusted by an amount equal to the amount calculated using the formula— opening value - closing value.
Amount The reserve at the end of the tax year is— (a) (b) an amount calculated by an actuary applying subsection (5) and adopted by the insurer for ﬁnancial reporting purposes; or if no such amount has been calculated, an amount deter- mined by the Commissioner, who may seek the advice of the Government Actuary or any other actuary in de- termining it.
(4) 1162 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 30 (5) (6) Calculation or determination of reserve A person calculating or determining the amount of a reserve under subsection (4) must ensure that the amount has regard to— (a) (b) (c) generally accepted accounting practice; and generally accepted actuarial practice; and the present value of expected future payments.

Link with subpart DA This section supplements the general permission.

The general limitations still apply.
Deﬁned in this Act: actuary, amount, Commissioner, deduction, general limita- tion, general permission, generally accepted accounting practice, pay, supple- ment, tax year Compare: 2004 No 35 s EZ 27 EZ 30 Base premium for 1998–99 premium year under Accident Insurance Act 1998 (1) (2) (3) Discount payment date An amount of base premium for the 1998–99 premium year that is paid on or before the discount payment date is treated as expenditure in the tax year in which the discount payment date falls if the discount payment date is before the date on the invoice that speciﬁes when payment is due.
This subsection overrides section EF 3(1) (Accident compensation levies and premiums).

Monthly instalment plan Interest payable on a base premium for the 1998–99 premium year under a monthly instalment plan is treated as being payable on the date that the interest is applied under regulation 8 of the Accident Insurance (Payment of Base Premiums) Regulations 1999.
Some deﬁnitions In this section, base premium for the 1998–99 premium year, discount payment date, and monthly instalment plan have the meanings given to them in the Accident Insurance (Payment of Base Premiums) Regulations 1999.
Deﬁned in this Act: amount, base premium for the 1998–99 premium year, discount payment date, interest, monthly instalment plan, pay, tax year Compare: 2004 No 35 s EZ 28 1163 Part E s EZ 31 Income Tax Act 2007 Reprinted as at 1 January 2010 Controlled foreign company and foreign investment fund rules EZ 31 Disclosure restrictions on grey list CFCs before 2011–12 [Repealed] Section EZ 31: repealed (with effect on 30 June 2009), on 6 October 2009, by section 195(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
EZ 32 Terminating exemption for grey list FIF investing in Australasian listed equities Initial qualifying requirements A person’s rights in a FIF are not an attributing interest if— (a) (b) the rights are a direct income interest (the shares); and on 17 May 2006, the company— (i) (ii) was not an entity described in schedule 25, part was a grey list company; and (iii) (iv) (v) B (Foreign investment funds); and had shareholders of which more than 40% had addresses in New Zealand on the company’s share register; and had shareholders referred to in subparagraph (iii) who between them held shares in the company carrying voting interests of more than 50%; and had assets of which more than 50% in total value were shares in other companies that were resident in New Zealand or Australia and were listed on a recognised exchange in New Zealand or Aus- tralia; and (c) on 17 May 2006, the shares were listed — (i) (ii) on a recognised exchange in New Zealand; and on a recognised exchange in a grey list country.
Ongoing qualifying requirements The exemption in subsection (1) does not apply unless, at all times in the income year, the company— is a grey list company; and (a) has assets of which more than 50% in total value are (b) shares in other companies that are resident in New Zealand; and (1) (2) 1164 Reprinted as at 1 January 2010 (c) Income Tax Act 2007 Part E s EZ 32B has assets of which more than 90% in total value are shares in other companies that are— (i) (ii) resident in New Zealand or Australia; and listed on a recognised exchange in New Zealand or Australia.
(3) (4) (5) Notiﬁcation requirement The exemption in subsection (1) does not apply unless the grey list company notiﬁed the Commissioner, by 17 January 2007, that the company met the requirements of subsection (1)(b) and (c) on 17 May 2006.

Exemption terminating after 2008–09 year The exemption in subsection (1) does not apply to the 2009–10 income year and later income years.
Choosing not to apply exemption The exemption in subsection (1) does not apply for a person, for an income year (the initial year) and for later income years, if the person completes a return of income for the initial year on the basis that the exemption does not apply for the person and the initial income year.
Deﬁned in this Act: attributing interest, company, direct income interest, FIF, grey list company, income year, recognised exchange, New Zealand, share- holder Compare: 2004 No 35 s EX 33B(2), (3) Section EZ 32(1): substituted, on 1 April 2008, by section 404(1) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EZ 32(3): amended, on 1 April 2008, by section 404(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
EZ 32B Transitional rule for IFRS reporting [Repealed] Section EZ 32B: repealed (with effect on 1 April 2008), on 6 October 2009, by section 196 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section EZ 32B: inserted, on 1 April 2008, by section 405 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
1165 Part E s EZ 33 Income Tax Act 2007 Reprinted as at 1 January 2010 Old ﬁnancial arrangements rules EZ 33 Application of old ﬁnancial arrangements rules The old ﬁnancial arrangements rules apply to ﬁnancial ar- rangements entered into on or after the implementation date and before 20 May 1999.
Compare: 2004 No 35 s EZ 30 EZ 34 Election to apply ﬁnancial arrangements rules in subpart EW Despite section EZ 33, a person may elect to apply the ﬁnan- cial arrangements rules by calculating a transitional adjust- ment under section EZ 51.
Compare: 2004 No 35 s EZ 31 EZ 35 Accruals in relation to income and expenditure in respect of ﬁnancial arrangements For the purpose of calculating the amount deemed to be in- come or expenditure of any person under subsections (2) to (7), regard must be had to,— (a) if the person is a holder in relation to the ﬁnancial ar- rangement,— (i) the amount of all consideration paid and to be paid to the person in relation to the ﬁnancial ar- rangement; and any amount remitted and to be remitted by the person in relation to the ﬁnancial arrangement; and the acquisition price of the ﬁnancial arrangement in relation to the person; and (ii) (iii) (b) if the person is an issuer in relation to the ﬁnancial ar- rangement,— (i) the amount of all consideration paid and to be paid by the person in relation to the ﬁnancial ar- rangement; and the acquisition price of the ﬁnancial arrangement in relation to the person.
(ii) Subject to this section, where any person is a holder or an is- suer of a ﬁnancial arrangement, the amount that is deemed to be income or expenditure of that person in respect of the ﬁnan- (1) (2) 1166 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 35 cial arrangement in any income year is an amount calculated using the yield to maturity method so as to result in the allo- cation to each income year of an amount that is fair and rea- sonable, and such amount so allocated to each income year is income deemed to be derived by or expenditure deemed to be incurred by the person in respect of the ﬁnancial arrangement in the income year: provided that the Commissioner must accept an alternative method to the yield to maturity method, that has regard to the principles of accrual accounting, and— (a) (b) (c) conforms with commercially acceptable practice; and except to the extent that the Commissioner may otherwise allow under subsection (8), is adopted by the person and is or will be consistently ap- plied in respect of all such ﬁnancial arrangements for ﬁnancial reporting purposes; and results in the allocation to each income year of amounts that are not materially different from amounts that would be calculated but for this pro- viso.
(3) Notwithstanding subsection (2), but subject to the other provi- sions of this section, where in any income year the total value of all ﬁnancial arrangements of which a person is a holder or an issuer has on no day within that income year exceeded $1,500,000 or such greater amount as the Governor-General may by Order in Council declare for the purposes of this sec- tion,— (a) the person may calculate income or expenditure for that income year in respect of those ﬁnancial arrangements by using the straight-line method so as to result in the allocation to that income year and subsequent income years of amounts that are fair and reasonable in respect of those arrangements; and where the straight-line method is used under paragraph (a), that method must be used by the person in respect of all ﬁnancial arrangements of which the person was the holder or issuer during that income year; and (b) 1167 Part E s EZ 35 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) where the person has in accordance with this subsection calculated income or expenditure using the straight-line method in respect of a ﬁnancial arrangement for any in- come year, the person must, unless otherwise authorised in writing by the Commissioner, continue to use that method in respect of that ﬁnancial arrangement for any subsequent income year, until the maturity, remittance, sale, or other transfer of the arrangement, notwithstand- ing that the total value of all ﬁnancial arrangements of which the person is holder or issuer may at any time in any such subsequent income year exceed $1,500,000 or such other amount as may be declared for the purposes of this section,— and any amount calculated in respect of a ﬁnancial arrange- ment in accordance with this subsection is income deemed to be derived by or expenditure deemed to be incurred by the person in respect of the ﬁnancial arrangement for the relevant income year.
For the purposes of subsection (3), a person must take into account ﬁnancial arrangements to which subpart EW applies.
For the purposes of subsection (3),— (a) the value of any ﬁnancial arrangement to be taken into account in determining whether the total value of all ﬁ- nancial arrangements of which a person is the holder or issuer on any day exceeds $1,500,000 or such other amount as may be declared for the purposes of this sec- tion is,— (i) in the case of a ﬁxed principal ﬁnancial arrange- ment, the nominal or face value of the arrange- ment; and in the case of a variable principal debt instrument, the amount owing by or to the person under the arrangement on the relevant day; and in the case of a ﬁnancial arrangement to which subpart EW applies, the value determined under that subpart; and (ii) (iii) (b) in the ﬁrst income year for which income or expenditure is calculated under subsection (3) in respect of a ﬁnan- cial arrangement that— (4) (5) 1168 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 35 (i) (ii) was acquired or issued by the person in a previ- ous income year; and continues to be held or issued by the person at the end of the ﬁrst income year for which income or expenditure is calculated under subsection (3),— the amount of income or expenditure of the person in respect of that ﬁnancial arrangement for that ﬁrst income year is an amount calculated in accordance with the following formula: a - b - c + d where— a is the sum of all amounts that would have been income derived by the person in respect of the ﬁnancial arrange- ment if the straight-line method referred to in subsection (3) had been
 applied to the ﬁnancial arrangement from the date it was acquired or issued by the person until the end of that ﬁrst income year is the sum of all amounts that would have been expend- iture incurred by the person in respect of the ﬁnancial arrangement if the straight-line method referred to in subsection (3) had been applied to the ﬁnancial arrange- ment from the date it was acquired or issued by the per- son until the end of that ﬁrst income year is the sum of all amounts of income deemed to have been
 derived by the person in respect of the ﬁnancial arrangement before the commencement of that ﬁrst in- come year is the sum of all amounts deemed to have been expend- iture incurred by the person in respect of the ﬁnancial arrangement before the commencement of that ﬁrst in- come year;— b c d and any amount so calculated is, if a positive amount, deemed to be income derived by the person in that ﬁrst income year and, if a negative amount, deemed to be expenditure incurred by the person in that ﬁrst income year.
(6) Where it is not possible to calculate an amount to be deemed to be income or expenditure in respect of a ﬁnancial arrange- ment using the yield to maturity method as provided for in subsection (2) or (in a case to which subsection (3) applies) the straight-line method as provided for in subsection (3), the 1169 Part E s EZ 35 Income Tax Act 2007 Reprinted as at 1 January 2010 amount that is deemed to be income or expenditure of the per- son in any income year is an amount calculated by the per- son— (a) using the method, if any, prescribed by the Commis- sioner for the ﬁnancial arrangement in a determination made under section 90(1)(c) of the Tax Administration Act 1994: provided that the Commissioner must accept an alternative method to the method prescribed in any such determination that has regard to the principles of accrual accounting, and— (i) (ii) (iii) conforms with commercially ac- ceptable practice; and except to the extent that the Com- missioner may otherwise allow under subsection (8), is adopted by the person and is or will be consis- tently applied in respect of all such ﬁnancial arrangements for ﬁnancial reporting purposes; and results in the allocation to each income year of amounts that are not materially different from the amounts that would be calculated, but for this proviso; and (b) in the absence of any such determination, by applying a method that meets the requirements of subparagraphs (i) and (ii) of the proviso to paragraph (a) and that results in the allocation to each income year of an amount that, having regard to the tenor of subsection (2), is fair and reasonable;— and such amount of income or expenditure so allocated to each income year is income deemed to be derived or, as the case may be, expenditure deemed to be incurred by the person in the income year.
Notwithstanding subsections (2) and (6), the Commissioner must accept an alternative method for calculating the amount to be deemed to be income or expenditure of the person, in respect of a ﬁnancial arrangement, to the methods provided (7) 1170 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 35 for under subsections (2) and (6), if the alternative method has regard to market valuation, and— (a) (b) conforms with commercially acceptable practice; and except to the extent that the Commissioner may other- wise allow under subsection (8), is adopted by the per- son and is or will be consistently applied in respect of all such ﬁnancial arrangements for ﬁnancial reporting purposes; and either— (i) the business of the person comprises dealing in such ﬁnancial arrangements; or the ﬁnancial arrangement is a forward or future contract for foreign exchange, or a futures con- tract; and (ii) the market, the method, and the source of the informa- tion used to determine the market values have been ap- proved by the Commissioner under a determination is- sued under section 90(1)(e) of the Tax Administration Act 1994; and the person and any other person who is a holder (where the person is an issuer) or an issuer (where the person is a holder) of the ﬁnancial arrangement are not associated persons;— (c) (d) (e) and such amount of income or expenditure so calculated is in- come deemed to be derived or, as the case may be, expenditure deemed to be incurred by the person in respect of the ﬁnancial arrangement in the income year: provided that where income or expenditure in respect of a ﬁ- nancial arrangement has been calculated by a person under this subsection, income or expenditure in respect of that ﬁnancial arrangement must, except as otherwise allowed under subsec- tion (8), continue to be calculated on that basis by that person until the maturity, remittance, sale, or other transfer of the ar- rangement.
(8) Where a method of calculating income or expenditure in re- spect of a ﬁnancial arrangement fails to meet the requirements of paragraph (b) of the proviso to subsection (2) or subpara- graph (ii) of the proviso to subsection (6)(a) or (7)(b) by virtue of the fact that the method is not or will not be consistently ap- 1171 Part E s EZ 35 Income Tax Act 2007 Reprinted as at 1 January 2010 plied by a person in respect of all such ﬁnancial arrangements for ﬁnancial reporting purposes, that method is nevertheless deemed to meet the relevant one of those provisions where the method— (a) appropriately reﬂects the dominant purpose for which the person acquired or issued the ﬁnancial arrangement (or each such arrangement); and has been and will be consistently applied by the per- son in respect of the particular ﬁnancial arrangement (or each such ﬁnancial arrangement) for the purposes of the old ﬁnancial arrangements rules for every in- come year during its term (except to the extent that the Commissioner approves or may approve a change in method under the circumstances or conditions speci- ﬁed in a determination under section 90(1)(f) of the Tax Administration Act 1994); and is not adopted for purposes that include the purpose of tax avoidance; and has been approved by the Commissioner for adoption in the circumstances applicable to the taxpayer either by notice to the taxpayer or in a determination issued under section 90 of the Tax Administration Act 1994.
(b) (c) (d) Subsections (2) to (7) do not apply— to a cash basis holder; or (a) in relation to a ﬁnancial arrangement and a person, in (b) any income year where section EZ 38 applies to that person and to that ﬁnancial arrangement; or in relation to a ﬁnancial arrangement where— (i) (c) the ﬁnancial arrangement is held by a trustee upon trust for the management of compensation paid for personal injury where that compensa- tion is paid under the Workers Compensation Act 1956 or the Accident Compensation Act 1972 or the Accident Compensation Act 1982 or the Accident Rehabilitation and Compensation Insurance Act 1992 or the Injury Prevention, Rehabilitation, and Compensation Act 2001 or an order of court; and (9) 1172 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 36 (ii) the trustee is, or if it were a natural person would be, a cash basis holder in respect of the ﬁnancial arrangement.
(10) For the purposes of this section, the Commissioner may deter- mine whether and to what extent any issuer or class of issuers is not required to comply with this section in relation to ex- penditure incurred or income derived in respect of any class of ﬁnancial arrangements, having regard to— (a) (b) (c) the nature and amount of the expenditure incurred or in- come derived by the issuer or class of issuers in respect of ﬁnancial arrangements of that class; and the costs of the issuer or class of issuers in complying with this section in relation to the class of ﬁnancial ar- rangements; and whether, in respect of that issuer or class of issuers and that class of ﬁnancial arrangements, the application of the discretion given to the Commissioner under this subsection would result in a material difference in the amount of deductions or income allocated to any in- come year, in relation to the amount that would have been allocated had the discretion not been exercised.
(11) The Commissioner may at any time cancel any determination made in respect of any person or class of persons under sub- section (10).
Compare: 2004 No 35 s EZ 32 EZ 36 Excepted ﬁnancial arrangement that is part of ﬁnancial arrangement The amount of the income deemed to be derived or the expend- iture deemed to be incurred by a person in respect of a ﬁnan- cial arrangement under the old ﬁnancial arrangements rules does not include the amount of any income, gain or loss, or expenditure, that is solely attributable to an excepted ﬁnancial arrangement that is part of the ﬁnancial arrangement.
Compare: 2004 No 35 s EZ 33 1173 Part E s EZ 37 Income Tax Act 2007 Reprinted as at 1 January 2010 EZ 37 Cash basis holder (1) Subject to this section, a natural person is a cash basis holder in respect of ﬁnancial arrangements held by that person in any income year, where— either— (a) (i) (ii) the income derived by that person in that income year in respect of those ﬁnancial arrangements, calculated in accordance with subpart EW or sec- tion EZ 35 or EZ 38, as the case may be, does not exceed $70,000 (or such greater amount as the Governor-General may by Order in Council declare); or the total value of ﬁnancial arrangements held by the person in the income year does not exceed at any time in the income year $600,000 (or such greater amount as the Governor-General may by Order in Council declare), the value in respect of each ﬁnancial arrangement being,— (A) in the case of a ﬁxed principal ﬁnancial arrangement, the greater of the acquisition price of the arrangement or the nominal or face value of the arrangement; and in the case of a variable principal debt in- strument, the amount of money owing to the person according to the arrangement; and in the case of a ﬁnancial arrangement to which subpart EW applies, the value de- termined under that subpart; and (B) (C) the difference between the following amounts does not exceed $20,000 (or such greater amount as the Gov- ernor-General may by Order in Council declare): (i) the amount of income that would be calculated by the person for the income year— (A) using, at
 the option of the person, either the yield to maturity method or the straight- line method referred to in section EZ 35(3) (regardless of whether or not the person is entitled or has opted to use that method) (b) 1174 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 37 or in accordance with subpart EW, as the case may be, or, where it is not possible to calculate an amount of income or expend- iture in respect of the ﬁnancial arrange- ments by using either of those methods, an alternative method approved by the Com- missioner; and under either section EW 31 or EZ 38—in respect of ﬁnancial arrangements held by the person at the end of the income year; and (B) (ii) the amount of income that would be calculated by the person for the income year in respect of ﬁnancial arrangements held by the person at the end of the income year if the person were a cash basis holder.
(2) (3) For the purposes of subsection (1), a person must take into account ﬁnancial arrangements to which subpart EW applies.
the Commis- Notwithstanding anything in subsection (1), sioner may,— (a) where the Commissioner is satisﬁed, having regard to the tenor of section EZ 35(2), that treatment of a class of ﬁnancial arrangements other than under section EZ 35 results in a fair and reasonable allocation of income or expenditure among income years, deem natural per- sons to be cash basis holders in respect of such ﬁnancial arrangements; and where the Commissioner is satisﬁed that a class of ﬁ- nancial arrangements has been structured and promoted with the objective of postponing any liability to income tax which would have arisen had those ﬁnancial ar- rangements not been so structured, deem natural per- sons not to be cash basis holders in respect of such ﬁ- nancial arrangements.
(b) (4) In any income year where a person who was a cash basis holder in the previous income year ceases to be a cash basis holder, the person must take into account, in calculating income or deductions for the income year, an accruals basis adjustment, in respect of every ﬁnancial arrangement (other than arrange- 1175 Part E s EZ 37 Income Tax Act 2007 Reprinted as at 1 January 2010 ments that are already dealt with according to section EZ 35 or in respect of which the Commissioner has exercised the dis- cretion given under subsection (3)(a)) acquired in a previous income year and held by the person at the end of the income year equal to an amount calculated in accordance with the fol- lowing formula: a - b - c + d where— a is the sum of all amounts which would have been in- come derived by the person in respect of the ﬁnancial arrangement from the date it was acquired to the end of the income year if the person had not been a cash basis holder at any time during that period is the sum of all amounts that would have been deduc- tions of the person in respect of the ﬁnancial arrange- ment from the date the ﬁnancial arrangement was ac- quired to the end of the income year if the person had not been a cash basis holder at any time during the period is the sum of all amounts of income of the person in re- spect of the ﬁnancial arrangement since it was acquired to the end of the previous income year is the sum of all amounts that have been deductions of the person in respect of the ﬁnancial arrangement since it was acquired to the end of the previous income year;— b c d (5) and the person must not take into account in the income year any other amount in respect of any such ﬁnancial arrangement except those calculated under the accruals basis adjustment.
In any income year where a person who was not a cash basis holder in the previous income year becomes a cash basis holder, in calculating income or deductions for the income year, a cash basis adjust- ment, in respect of every ﬁnancial arrangement (other than arrangements already treated on a cash basis) acquired in a previous income year and held by the person at the end of the income year, equal to an amount calculated in accordance with the following formula: that person may take into account, a - b - c + d where— 1176 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 37 a b c d is the sum of all amounts which would have been in- come derived by the person in respect of the ﬁnancial arrangement from the date it was acquired to the end of the income year if the person had been a cash basis holder in respect of the ﬁnancial arrangement for the whole of that period is the sum of all amounts which would have been deduc- tions of the person in respect of the ﬁnancial arrange- ment from the date the ﬁnancial arrangement was ac- quired to the end of the income year if the person had been a cash basis holder in respect of the ﬁnancial ar- rangement for the whole of the period is the sum of all amounts treated as income of the per- son in respect of the ﬁnancial arrangement since it was acquired to the end of the previous income year is the sum of all amounts that have been deductions of the person in respect of the ﬁnancial arrangement since it was acquired to the end of the previous income year;— (6) (7) and, where the cash basis adjustment has been taken into ac- count, the person must not take into account any other amount in respect of any such ﬁnancial arrangement in the income year except those calculated under the cash basis adjustment: provided that the person is deemed not to be a cash basis holder in relation to any ﬁnancial arrangement in respect of which the person does not take into account a cash basis adjustment.
The amount of the accruals basis adjustment or the cash basis adjustment in respect of any ﬁnancial arrangement and any income year is,— (a) where it is a positive amount, income deemed to be derived by the holder in the income year; and where it is a negative amount, deemed to be a deduction of the holder in the income year.
(b) For the purposes of subsection (1), but subject to subsections (8) and (9),— (a) all income in respect of ﬁnancial arrangements that is trustee income or beneﬁciary income under the trust rules is disregarded, as is the value of all such ﬁnan- cial arrangements producing such income; and 1177 Part E s EZ 38 Income Tax Act 2007 Reprinted as at 1 January 2010 (8) (b) no person who holds such ﬁnancial arrangements is a cash basis holder in relation to such ﬁnancial arrange- ments.
Subsection (7) does not apply to ﬁnancial arrangements held on a bare trust, or to income in respect of such ﬁnancial ar- rangements, and the ﬁnancial arrangements held and the in- come derived by the trustees is treated as being held or, as the case may be, derived by a beneﬁciary of the trust to the extent of the beneﬁciary’s share of the beneﬁcial interest in the ﬁnan- cial arrangement.
(9) Where a deceased person was at the time of his or her death a cash basis holder,— (a) nothing in subsection (7) or in any requirement under this section that a cash basis holder be a natural per- son, in respect of the income year in which the death occurred and in each of the 4 immediately succeeding income years, applies to prevent the trustee of the estate of the deceased person from being a cash basis holder for the purposes of this Act in respect of ﬁnancial ar- rangements issued or held by the estate, where the estate would otherwise qualify as a cash basis holder under this section; but if at any time during those income years the estate ceases to so otherwise qualify as a cash basis holder, it does not again qualify to become a cash basis holder by operation of paragraph (a);— (b) and for the purposes of subsections (4) and (5), any trustee of an estate who is a cash basis holder under this subsection is deemed to be the same person as the deceased cash basis holder.
[Repealed] Compare: 2004 No 35 s EZ 34 Section EZ 37(10): repealed, on 1 April 2008, by section 15(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
(10) EZ 38 Income and expenditure where ﬁnancial arrangement redeemed or disposed of Subject to subsection (2), where, in relation to any person, a ﬁnancial arrangement matures or is remitted (other than by (1) 1178 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 38 way of being written off as a bad debt), sold, or otherwise transferred by the person in any income year, the amount of the base price adjustment in relation to that income year, that person, and that ﬁnancial arrangement is an amount calculated in accordance with the following formula: a - (b + c) where— a is,— (i) (ii) in the case of a holder, the sum of— (A) the amount of all consideration that has been paid, and all further consideration that has or will become payable, to the per- son; and any amounts that have been remitted by the person and that are not included in sub- subparagraph (A): in the case of an issuer, the sum of— (A) the amount of all consideration that has been paid, and all further consideration that has or will become payable, by the person; and the amount paid by the person associated with the issuer if the issuer is the debtor of a debt to which section EZ 41 applies— (B) (B) b c in relation to the ﬁnancial arrangement is the acquisition price of the ﬁnancial arrangement in relation to the person is,— (i) in the case of a holder, all amounts that are in- come derived, less the aggregate of amounts of expenditure deemed to be incurred under sec- tion EZ 35 or EZ 42 or deemed to be a deduc- tion under section EZ
 37 by the person in respect of the ﬁnancial arrangement in all previous in- come years since the acquisition of the ﬁnancial arrangement; and in the case of an issuer, all amounts of expend- iture incurred in respect of the ﬁnancial arrange- ment in all previous income years since the issue (ii) 1179 Part E s EZ 38 Income Tax Act 2007 Reprinted as at 1 January 2010 of the ﬁnancial arrangement, less the aggregate of— (A) (B) all amounts that are income deemed to be derived under section EZ 35 or EZ 37 or EZ 42 by the person in respect of the ﬁnan- cial arrangement in all previous income years since the issue of the ﬁnancial ar- rangement; and all amounts that are dividends derived by the person from the release of the obliga- tion to repay the amount lent; and all amounts that are income of the person under section CF 2 in respect of the ﬁnan- cial arrangement.
(2) Where, in relation to a ﬁnancial arrangement, a person is a cash basis holder, and the ﬁnancial arrangement matures or is remit- ted (other than by way of being written off as a bad debt), sold, or otherwise transferred by that person in any income year, the amount of the cash base price adjustment in relation to that in- come year, that person, and that ﬁnancial arrangement is an amount calculated in accordance with the following formula: a - (b + c) (C) where— a b c is the sum of all consideration derived in respect of the ﬁnancial arrangement by the person, and amounts re- mitted by the person is the acquisition price of the ﬁnancial arrangement is the sum of all amounts that are income derived by the person, less the aggregate of amounts of expenditure deemed to be incurred under sections EZ 35 and EZ 42 or deemed to be a deduction under section EZ 37.
Subject to subsection (5), the amount of the base price adjust- ment in relation to any ﬁnancial arrangement and any income year is,— (a) in relation to a holder,— (i) where it is a positive amount, deemed to be in- come derived by the holder in the income year; and (3) 1180 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 38 (b) (ii) where it is a negative amount, deemed to be a deduction of the holder in the income year: in relation to an issuer,— (i) where it is a positive amount, deemed to be ex- penditure incurred by the issuer in the income year; and (ii) where it is a negative amount, deemed to be in- come derived by the issuer in the income year.
(4) (5) Subject to subsection (5), the amount of the cash base price adjustment in relation to any ﬁnancial arrangement and any income year is,— (a) where it is a positive amount, deemed to be income derived by the cash basis holder in the income year; and where it is a negative amount, deemed to be a deduction of the cash basis holder in the income year.
(b) Notwithstanding anything in section EZ 50(3), where a ﬁnan- cial arrangement is sold or otherwise transferred by a person for a consideration inﬂuenced by— (a) a decline in the creditworthiness of the issuer between the date of acquisition of the ﬁnancial arrangement by the holder and the date of sale or other transfer; or an increase in the possibility that the issuer may fail to meet any obligations under the ﬁnancial arrangement between the date of acquisition of the ﬁnancial arrange- ment by the holder and the date of sale or other transfer; or the occurrence of any event reducing or cancelling the obligations of an issuer under the ﬁnancial arrange- ment,— (b) (c) all amounts that would have been received but for the factors listed above are deemed, in calculating the base price adjust- ment or cash base price adjustment, to have become payable to the holder: provided that this subsection does not apply where the busi- ness of the holder comprises holding or dealing in ﬁnancial arrangements of that class, and the issuer of the ﬁnancial ar- rangement and the holder are not associated persons.
(6) Where— 1181 Part E s EZ 38 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) a person has been released from the obligation to make payment of an amount— (i) under a ﬁnancial arrangement by operation of section 304 of the Insolvency Act 2006; or under any of the Inland Revenue Acts (and whether the relief arises through remission, waiver, or cancellation); or under a social assistance suspensory loan by virtue of that person satisfying the conditions referred to in subsection (8)(c)(ii); and (ii) (iii) (b) that amount would, but for this subsection, be taken into account in determining the income derived by or ex- penditure incurred by that person under the old ﬁnancial arrangements rules,— that amount is, for the purpose of determining the income de- rived by or expenditure incurred by that person, and notwith- standing the old ﬁnancial arrangements rules (other than this subsection), deemed to have been paid under that ﬁnancial ar- rangement when the obligation to make payment has been so released.
Notwithstanding anything in this Act, where and to the extent that a person (in this subsection called the surety) suffers ex- penditure or a loss under a security arrangement and the ex- penditure or loss, in whole or in part, is due to— (a) (b) the actions of; or the occurrence, or failure to occur, of an event that was potentially or actually subject to the inﬂuence of— the surety or any person with whom the surety was, during the term of the security arrangement, an associated person, no deduction is allowed to the surety or any person in relation to the expenditure or loss.
In this section,— (a) the expression holder, in relation to a ﬁnancial arrange- ment, includes a person who ceases to be a holder of the ﬁnancial arrangement as provided in subsection (1) or (2); and the expression issuer, in relation to a ﬁnancial arrange- ment, includes a person who ceases to be an issuer of (7) (8) (b) 1182 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 38 (c) (d) the ﬁnancial arrangement as provided in subsection (1); and the expression social assistance suspensory loan means a loan— (i) made by a department or instrument of the Ex- ecutive Government of New Zealand; and under whose terms the issuer’s liability may be remitted in whole or in part if the issuer satisﬁes conditions intended to promote a social policy objective of the Government of New Zealand; and of a kind that is declared by the Governor-Gen- eral by Order in Council to be a social assistance suspensory loan; and (ii) (iii) is deemed to be remitted a ﬁnancial arrangement where— (i) the issuer has been discharged from making all remaining payments under that ﬁnancial arrange- ment without fully adequate consideration; or the issuer has been released from making all re- maining payments under that ﬁnancial arrange- ment by the operation of the Insolvency Act 2006 or the Companies Act 1955 or the Companies Act 1993 or the laws of any country or territory other than New Zealand, or by any deed or agreement of composition with its creditors; or all of the remaining payments under the ﬁnancial arrangement have
 become irrecoverable or unen- forceable by action through the lapse of time; or the ﬁnancial arrangement is a debt that is sold at a discount to a person associated with the debtor under the circumstances described in section EZ 41; and (ii) (iii) (iv) (e) where a person ceases to be a New Zealand resident any ﬁnancial arrangement in relation to which that person is an issuer or a holder is deemed, in relation to the person, to have been transferred for its market value at that date.
Compare: 2004 No 35 s EZ 35 1183 Part E s EZ 39 Income Tax Act 2007 Reprinted as at 1 January 2010 Section EZ 38(6)(a)(iii): amended (with effect on 1 April 2008), on 6 October 2009, by section 197(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
EZ 39 Forgiveness of debt (1) In determining the income or expenditure under the base price adjustment in section EZ 38, an amount owing under a debt, including an amount accrued and unpaid at the time of the forgiveness, is treated as paid when forgiven under the old ﬁnancial arrangements rules if— (a) the creditor is a natural person who forgives the debt, whether in a will or otherwise, because of the natural love and affection the creditor has for the debtor; or the creditor is a natural person who forgives the debt owing by a trust, whether in a will or otherwise, and the trust was established primarily to beneﬁt— (i) (b) (ii) (iii) a natural person for whom the creditor has natural love and affection; or an organisation or a trust whose income is exempt under section CW 41 or CW 42; or a natural person that meets paragraph (b)(i) and an organisation or a trust that meets paragraph (b)(ii).
Subsection (3) applies when a trustee makes a distribution, including a distribution of beneﬁciary income, to a beneﬁciary that is neither— (a) a natural person for whom the creditor has natural love and affection; nor an organisation or a trust whose income is exempt under section CW 41 or CW 42.
(b) Subsection (4) does not apply when a trustee of a trust (trust A) to which subsection (1)(b) applies makes a distribution to another trust (trust B) if— (a) trust B is a trust described in subparagraph (i), (ii), or (iii) of subsection (1)(b); and subsection (1)(b) would apply to trust B if, at the time the distribution is made, the creditor of trust A were a creditor of trust B, and the creditor had forgiven a debt owing by trust B.
(b) (2) (3) 1184 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 40 (4) (5) (6) (7) (b) A distribution to the beneﬁciary is income derived by the trustee— (a) in the income year in which the distribution is made; and to the extent that the distribution is less than or equal to the total amount of debts forgiven by the creditor.

If subsection (4) applies, the income derived by the trustee is not income for the purposes of the beneﬁciary income deﬁn- ition.
For the purposes of subsection (4), the total amount of debts forgiven by the creditor is reduced by the amount of each dis- tribution that is income derived by the trustee.

Subsection (4) applies to a distribution made on or after 20 May 1999.
Compare: 2004 No 35 s EZ 36 EZ 40 Accrued income written off (1) (2) A deduction is allowed to a person for an amount written off by the person as a bad debt in respect of a ﬁnancial arrangement where and to the extent that— (a) the person derives income in respect of the ﬁnancial arrangement under any of sections EZ 35, EZ 37(4), EZ 38, and EZ 42; and the amount written off is attributable to that income.
(b) A deduction is allowed to a person for an amount written off by the person as a bad debt in respect of a ﬁnancial arrangement (not being an amount allowed as a deduction under subsection (1)) where— (a) the person— (i) carries on a business which comprises holding or dealing in such ﬁnancial arrangements; and is not associated with the person owing the amount written off; or (ii) (b) the ﬁnancial arrangement is a trade credit and the person carries on a business of dealing in the goods or services for which the trade credit is a debt.
(3) Where a person receives a security payment in relation to a loss and a deduction is denied to the person for the loss other 1185 Part E s EZ 41 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) (5) than under this subsection, the person is allowed a deduction for the loss no greater than the amount of the security payment.

A deduction for bad debts is allowed under this section only where the requirements of section DB 31(1) and (5) have been met.
A deduction for a share loss (within the meaning of section DB 24) is allowed under subsection (3) only where the require- ments of section DB 24 have been met.

Compare: 2004 No 35 s EZ 37 EZ 41 Sale of debt to associate of debtor (1) This section applies to a ﬁnancial arrangement that is a debt which is sold at a discount to a person associated with the debtor on or after 20 May 1999.
A creditor is treated as having sold a debt at a discount if the debt is sold to a person associated under the 1988 version pro- visions with the debtor for 80% or less of the market value of the debt.
Subsection (4) applies to a debt that is sold if its market value was inﬂuenced by— (a) the decline in the original debtor’s creditworthiness be- tween the date the debt was entered into and the date of sale; or an increase in the possibility that the original debtor would not pay an amount owing under the debt between the date the debt was entered into and the date of sale; or an event that occurred which reduced or cancelled the original debtor’s obligations under the debt.
(b) (c) For the purposes of subsection (2), a debt’s market value is de- termined as if its market value were not inﬂuenced by a factor listed in subsection (3)(a) to (c).

If a debt is sold at a discount to a person associated with the debtor, the associated person is treated as having provided the debtor with an interest free loan for the amount paid for the debt.
(2) (3) (4) (5) 1186 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 42 (6) If the debtor subsequently repays the person associated with the debtor more than the amount the associated person paid for the debt, the excess amount paid by the debtor is— (a) (b) Compare: 2004 No 35 s EZ 38 a deduction to the debtor; and income of the person associated with the debtor.
EZ 42 Post facto adjustment (1) A ﬁnancial arrangement is subject to the provisions of this section where— (a) any of the amount or amounts payable under the ﬁnan- cial arrangement are determined in the terms of the ﬁ- nancial arrangement, as to whole or part, at the discre- tion of either the issuer or the holder, or both of them, or at the discretion of any other person where either the issuer or the holder and the other person are associated persons; and the change in the amount or amounts payable under the ﬁnancial arrangement upon the exercise of a discretion as provided for in paragraph (a) does not reﬂect changes in economic, commodity, industrial, or ﬁnancial indices or banking or general commercial rates; and the making of such ﬁnancial arrangements is not gener- ally accepted commercial practice; and the effect of the arrangement is to defeat the intent and application of the old ﬁnancial arrangements rules.
(2) Where a ﬁnancial arrangement is subject to the provisions of this section, both the holder and the issuer of the ﬁnancial ar- rangement are required to calculate a post facto adjustment in respect of the following income years: (a) the income year in which the person ceases to be a holder or an issuer, as the case may be, in respect of the ﬁnancial arrangement; and where the person has not ceased to be a holder or an issuer of the ﬁnancial arrangement at the end of the ﬁfth income year following the income year of its issue or acquisition by the person, in that ﬁfth income year; and until the person ceases to be an issuer or a holder in re- spect of the ﬁnancial arrangement, in every ﬁfth income 1187 (b) (c) (d) (b) (c) Part E s EZ 42 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) year succeeding the income year in which the post facto adjustment was last required to be made under this sec- tion.
In order to calculate the post facto adjustment, a person must,— (a) having regard to all amounts speciﬁed in section EZ 35(1) which have been paid or are payable, in respect of the ﬁnancial arrangement, since acquisition or issue of the ﬁnancial arrangement by the person to the end of the income year in which the post facto adjustment applies, calculate amounts of income or expenditure under the arrangement for each income year using the yield to maturity method as prescribed in a determination made by the Commissioner for the purposes of section EZ 35(2): provided that where the post facto adjustment is made at a time determined by subsection (2)(b) or (c), the person is, for the purpose of the post facto adjustment calculation, deemed to have trans- ferred the ﬁnancial arrangement for an amount equal to its market value on the last day of the in- come year; and (b) recalculate the income tax liability for each income year using the amounts of income or expenditure calculated under paragraph (a) in substitution for the amounts of income or expenditure previously calculated in respect of the ﬁnancial arrangement for each income year.
(4) Where a person has been required to calculate the post facto adjustment, the person is required to make a special return in respect of the post facto adjustment in the form required by the Commissioner, no later than the time at which that person is required to ﬁle an annual return for the income year in which the post facto adjustment is made.
Despite the time bar, the Commissioner must amend the per- son’s assessment for the income years to which the post facto adjustment relates in accordance with the alterations to that income or expenditure as calculated by the post facto adjust- ment.
Compare: 2004 No 35 s EZ 39 (5) 1188 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 44 EZ 43 Variable principal debt instruments For the purposes of the old ﬁnancial arrangements rules, where a person is a party to a variable principal debt instrument on the implementation date, the person is deemed to have acquired or, as the case may be, issued it on that day for a consideration equal to the amount of money that would be payable to the holder on that day if the amount or amounts payable under the ﬁnancial arrangement were due and payable on that day.
Compare: 2004 No 35 s EZ 40 (2) EZ 44 Relationship with rest of Act (1) Notwithstanding any other provision in this Act, income or ex- penditure in an income year in respect of a ﬁnancial arrange- ment under the old ﬁnancial arrangements rules is calculated under those rules.
Expenditure incurred under the old ﬁnancial arrangements rules is not included in— (a) (b) (c) (d) (e) (f) (g) (h) the cost of trading stock, for small taxpayers: the cost of revenue account property: the cost of livestock: the cost of bloodstock: the cost of acquiring a ﬁlm or a ﬁlm right: ﬁlm production expenditure: the cost of timber: petroleum exploration expenditure or petroleum devel- opment expenditure.
(3) Where— (a) (b) property is transferred under a ﬁnancial arrangement; and the property or the consideration given for the property is relevant under any provision of this Act other than the old ﬁnancial arrangements rules for the purpose of determining any amount of income or deduction of a person,— the property is treated for the purpose of that provision as hav- ing been transferred under the ﬁnancial arrangement for an amount equal to the acquisition price of the property.
Compare: 2004 No 35 s EZ 41 1189 Part E s EZ 45 Income Tax Act 2007 Reprinted as at 1 January 2010 EZ 45 Application of old ﬁnancial arrangements rules The old ﬁnancial arrangements rules do not apply— (a) in relation to a person and a ﬁnancial arrangement, where the ﬁnancial arrangement was issued or acquired by the person before the implementation date for the ﬁnancial arrangement; or in relation to a ﬁnancial arrangement, where the issue, in the case of an issuer, or acquisition, in the case of a holder, of the ﬁnancial arrangement is under a binding contract in existence before the implementation date in relation to that ﬁnancial arrangement: provided that this paragraph does not apply in relation to a rollover, extension, or advance provided for before the implementation date in relation to the ﬁnancial arrangement where the rollover, extension, or advance occurs on or after 1 April 1990; or in relation to a person and a ﬁnancial arrangement, where the person acquired the ﬁnancial arrangement in accordance with a relationship agreement and the transferor, in relation to the ﬁnancial arrangement, was a person to whom paragraph (a) or (b) applied; or in relation to a ﬁnancial arrangement, where the issue, in the case of an issuer, or acquisition, in the case of a holder, of the ﬁnancial arrangement is under and in terms of a rollover, extension, or advance provided for before the implementation date in relation to the ﬁnan- cial arrangement and the rollover, extension, or advance occurs before 1 April 1990;
 or to the determination of— (i) income of or expenditure incurred by a person not resident in New Zealand in relation to a ﬁnancial arrangement where and to the extent that the ﬁ- nancial arrangement does not relate to a business carried on by that person through a ﬁxed estab- lishment in New Zealand; or non-resident passive income; or (ii) in relation to a ﬁnancial arrangement to the extent that the income or expenditure incurred by a person in re- (b) (c) (d) (e) (f) 1190 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 46 spect of the ﬁnancial arrangement consists of interest payable to or by the Commissioner under Part 7 of the Tax Administration Act 1994, being interest payable in relation to the income tax liability of the taxpayer in re- spect of the 1994–95 income year or any subsequent in- come year.
Compare: 2004 No 35 s EZ 42 EZ 46 Election to treat short term trade credit as ﬁnancial (1) (2) (3) (4) arrangement For the purposes of the old ﬁnancial arrangements rules, a tax- payer may elect by notice given in accordance with subsection (2) to treat short term trade credits speciﬁed in subsection (4) as ﬁnancial arrangements.
Notice of an election under subsection (1) in relation to an income year must be given to the Commissioner within the time within which a vendor or a purchaser is required under section 37 of the Tax Administration Act 1994 to furnish a return of income for the income year to which the election is to apply.
An election by the taxpayer under subsection (1) may be re- voked by notice given to the Commissioner during any income year and the revocation applies only to short term trade credits created on or after the commencement of the subsequent in- come year.
An election under subsection (1) may be made in respect of— (a) (b) all short term trade credits of the taxpayer; or 1 or more classes of short term trade credits of the tax- payer that the taxpayer deﬁnes by reference either— (i) to the particular currency in which the short term trade credit is denominated; or to the term of the short term trade credit; or to both the term and the particular currency in which the short term trade credit is denominated.
(ii) (iii) Compare: 2004 No 35 s EZ 43 1191 Part E s EZ 47 Income Tax Act 2007 Reprinted as at 1 January 2010 EZ 47 Election to continue to treat certain excepted ﬁnancial (1) (2) (3) arrangements as ﬁnancial arrangements A person may elect to continue to treat all excepted ﬁnancial arrangements under any of paragraphs (p), (q), (r), (s), (t), (u), and (v) of the deﬁnition of excepted ﬁnancial arrangement as ﬁnancial arrangements if the person is a holder or an issuer of an arrangement that was entered into on or after the person’s last balance date and before 20 May 1999.
A person elects to treat their excepted ﬁnancial arrangements as ﬁnancial arrangements by returning income derived and ex- penditure incurred from the elected arrangements under the old ﬁnancial arrangements rules in their return of income.
A ﬁnancial arrangement that is an excepted ﬁnancial arrange- ment under any of paragraphs (p), (q), (r), (s), (t), (u), and (v) of the deﬁnition of excepted ﬁnancial arrangement is not an excepted ﬁnancial arrangement for the holder or issuer who elects to treat it as a ﬁnancial arrangement under subsection (1).
Compare: 2004 No 35 s EZ 44 EZ 48 Deﬁnitions For the purposes of the old ﬁnancial arrangements rules, each of the following terms has the meaning given to it, despite any other meaning given to the term in section YA 1 for any other purpose and unless the context otherwise requires: acquisition price,— (a) in relation to a ﬁnancial arrangement and a holder of the ﬁnancial arrangement, means an amount calculated in accordance with the following formula: y - z where— y is the core acquisition price of the ﬁnancial ar- rangement is the smaller of— (i) the amount of consideration provided in relation to the ﬁnancial arrangement by the holder that is not contingent on the im- plementation of the ﬁnancial arrangement; and z 1192 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 48 (ii) an amount equal to 2% of the core acqui- sition price of the ﬁnancial arrangement; and (b) in relation to a ﬁnancial arrangement and an issuer of the ﬁnancial arrangement, means an amount calculated in accordance with the following formula: y + z where— y z is the core acquisition price of the ﬁnancial ar- rangement is the smaller of— (i) the amount of consideration provided in relation to the ﬁnancial arrangement by the issuer that is not contingent on the im- plementation of the ﬁnancial arrangement; and an amount equal to 2% of the core acqui- sition price of the ﬁnancial arrangement (ii) agreement for the sale and purchase of property, in relation to a person, means a ﬁnancial arrangement that is an agreement (whether
 conditional or unconditional) entered into by the per- son to purchase or otherwise acquire or sell or otherwise dis- pose of property; but does not include an option, a speciﬁed option, or a futures contract amount of all consideration, in the deﬁnition of core acqui- sition price, in relation to a person and to an agreement for the sale and purchase of property or a speciﬁed option, where all or part of the consideration provided to the holder is property, means the aggregate of the amount calculated in
 respect of that property in the manner provided in subparagraph (i) or (ii) of item “w” in paragraph (c) of the deﬁnition of core acquisition price and any consideration provided to the holder in relation to the ﬁnancial arrangement, other than the property provided to the holder core acquisition price, in relation to a ﬁnancial arrangement, means,— (a) where section EZ 50 applies, the amount determined under that section; and 1193 Part E s EZ 48 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) where the ﬁnancial arrangement is a trade credit, an amount calculated in accordance with the following for- mula: u + v where— u is— (i) (ii) (iii) the cash price of the goods or services to which the trade credit relates (referred to in this item and item “v” as the speci- ﬁed goods or services), as determined by 5 of the Credit Contracts and Consumer Finance Act 2003; or if subparagraph (i) is not applicable, the lowest price at which the speciﬁed goods or services could be purchased under a short term trade credit; or if subparagraphs (i) and (ii) are not applic- able, the discounted value of the amounts payable for the speciﬁed goods or services, as determined under a determination made by the Commissioner under 90(1)(h) of the Tax Administration Act 1994 v is,— (i) (ii) in relation to a holder of the ﬁnancial ar- rangement, the amount of all consideration provided by the holder in relation to the ﬁ- nancial arrangement, other than the speci- ﬁed goods or
 services; or in relation to an issuer of the ﬁnancial ar- rangement, the amount of all consideration provided to the issuer in relation to the ﬁ- nancial arrangement, other than the speci- ﬁed goods or services; and where the ﬁnancial arrangement is an agreement for the sale and purchase of property (not being an agreement for the sale and purchase of property that has lapsed or otherwise does not proceed) or a speciﬁed option (not being a speciﬁed option that has lapsed or otherwise (c) 1194 Reprinted as at 1
 January 2010 Income Tax Act 2007 Part E s EZ 48 does not proceed), an amount calculated in accordance with the following formula: w + x where— w is— (i) (ii) x is,— (i) (ii) the lowest price (determined in accord- ance with section EZ 49, if the consid- eration payable under the relevant ﬁnan- cial arrangement is denominated in a for- eign currency) that the parties would have agreed upon for the property that is the subject of the agreement for the sale and purchase of property or the speciﬁed op- tion (referred to in this item and item “x” as the speciﬁed property) at the time at which the agreement for the sale and pur- chase of property was entered into or the speciﬁed option was granted on the basis of payment in full at the time at which the ﬁrst right in the speciﬁed property is to be transferred; or if subparagraph (i) is not applicable, the discounted value of the amounts payable for the speciﬁed property as determined under a determination made by the Com- missioner under section 90(1)(h) of the Tax Administration Act 1994 in relation to the holder of the ﬁnancial ar- rangement, the amount of all consideration provided by the holder in relation to the ﬁ- nancial arrangement other than the speci- ﬁed property; or in relation to an issuer of the ﬁnancial ar- rangement, the amount of all consideration provided to the issuer in relation to the ﬁ- nancial arrangement other than the speci- ﬁed property; and 1195 Part E s EZ 48 Income Tax Act 2007 Reprinted as
 at 1 January 2010 (d) where the ﬁnancial arrangement is a hire purchase agreement and the holder is the ﬁrst holder in relation to the hire purchase agreement, either— (i) an amount calculated in accordance with the fol- lowing formula: a + b + c where— a is— (A) (B) the cash price of the hire purchase asset (as cash price is deﬁned in section 5 of the Credit Contracts and Consumer Finance Act 2003); or if subsubparagraph (A) of this item is not applicable, the lowest price at which the hire purchase asset
 could be purchased under a short term trade credit at the time of com- mencement of the hire purchase agreement b c is the amount of all expenditure or loss in- curred by the holder in preparing and in- stalling the hire purchase asset for use to the extent to which any such expenditure or loss is not taken into account in deter- mining the amount of item “a” is,— (A) in relation to the holder, the amount of all consideration provided by the holder in relation to the hire pur- chase agreement, other than the hire purchase asset and the expenditure or loss referred to in item “b”; or in relation to the issuer, the amount of all consideration provided to the issuer in relation to the hire pur- chase agreement, other than the hire purchase asset and the expenditure or loss referred to in item “b”; or (B) 1196 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 48 (ii) if subparagraph (i) is not applicable, or if either the holder or the issuer in relation to the hire pur- chase agreement applies to the Commissioner for a speciﬁc determination, an amount calculated in accordance with the following formula: d + e where— d is— (A) the discounted value of all hire pur- chase payments payable under the hire purchase agreement, as deter- mined under a determination made by the Commissioner under section 90(1)(i) of the Tax Administration Act 1994; or (B) where either the holder or the is- suer in relation to the hire purchase agreement applies to the Commis-
 sioner for a speciﬁc determination, an amount determined by the Com- missioner in relation to that applica- tion (and the amount so determined applies for both the holder and the issuer to the exclusion of any de- termination made in respect of that hire purchase agreement under sub- subparagraph (A) of this item) e is,— (A) (B) in relation to the holder, the amount of all consideration provided by the holder in relation to the hire purchase agreement, other than the hire purchase asset and any expend-
 iture or loss incurred by the holder in preparing and installing the hire purchase asset for use; or in relation to the issuer, the amount of all consideration provided to the issuer in relation to the hire pur- 1197 Part E s EZ 48 Income Tax Act 2007 Reprinted as at 1 January 2010 chase agreement, other than the hire purchase asset and any expenditure or loss incurred by the holder in preparing and installing the hire purchase asset for use; and (e) (b) (ii) where none of paragraphs (a) to (d) applies to a ﬁnancial arrangement,— (i) in relation to a holder of the ﬁnancial arrange- ment, the value of all consideration provided by the holder in relation to the ﬁnancial arrange- ment; or in relation to an issuer of the ﬁnancial arrange- ment, the value of all consideration provided to the issuer in relation to the ﬁnancial arrangement excepted ﬁnancial arrangement, other than an arrangement listed in paragraphs (p), (q), (r), (s), (t), (u), and (v) that a taxpayer has treated as a ﬁnancial arrangement in a return of income already ﬁled, means any of the following arrangements an annuity for a term contingent upon human life or an (a) annuity for a term not contingent on human life to which section EY 8(2)(c) applies: an insurance contract or membership of a superannu- ation scheme: a debenture to which section FA 2 applies: a short term trade credit, unless the purchaser or vendor has elected in accordance with section EZ 46 to treat the short term trade credit as a
 ﬁnancial arrangement to which the old ﬁnancial arrangements rules apply: a speciﬁed preference share to which section FZ 1 of the Income Tax Act 2004 applies: in relation to a holder or an issuer, shares, other than withdrawable shares, or an option to buy shares, other than withdrawable shares, where those shares were or that option was acquired or issued by the person before 8.00 pm New Zealand Standard Time on 18 June 1987: in relation to a holder or an issuer, shares, other than withdrawable shares, or
 an option to acquire or to sell or otherwise dispose of shares, other than withdraw- able shares, where those shares were or that option was (c) (d) (g) (e) (f) 1198 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 48 (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) (r) (s) (t) (u) (v) acquired or issued by the person after 8.00 pm New Zealand Standard Time on 18 June 1987: a lease: a bet on any— (i) race, as deﬁned in section 5 of the Racing Act 2003; or sporting event under a sports-betting system ad- ministered under Part 6 of the Racing Act 2003; or gambling, including a New Zealand lottery, as those terms are deﬁned in section 4(1) of the Gambling Act 2003: (ii) (iii) in relation to an issuer or a holder, an option to acquire or to sell or otherwise dispose of property (other than an interest in a ﬁnancial arrangement) where the option was issued or acquired by the person after 8.00 pm New Zealand Standard Time on 18 June 1987 for private or domestic purposes only: a short term agreement for the sale and purchase of property: a short term option: a private or domestic agreement for the sale and pur- chase of property: a farm-out arrangement: a hire purchase agreement, as deﬁned in section YA 1, but including an agreement that would be a hire pur- chase agreement but for the exclusion in paragraph (f) of the deﬁnition of that term, entered into before 1 April 1993, or any assignment of such an agreement: a loan that is interest free, repayable on demand, and
 denominated in New Zealand dollars, for the lender of the loan only: an employment contract: an interest in a group investment fund: an interest in a partnership or a joint venture: travellers’ cheques: a warranty for goods or services: a hire purchase agreement for livestock or bloodstock entered into on or after 1 April 1993 1199 Part E s EZ 48 Income Tax Act 2007 Reprinted as at 1 January 2010 ﬁnancial arrangement means— (a) (b) any debt or debt instrument; and any arrangement (whether or not such
 arrangement in- cludes an arrangement that is a debt or debt instrument, or an excepted ﬁnancial arrangement) whereby a person obtains money in consideration for a promise by any person to provide money to any person at some future time or times, or upon the occurrence or non-occurrence of some future event or events (including the giving of, or failure to give, notice); and any arrangement which is of a substantially similar na- ture (including, without restricting the generality of the preceding provisions of this subparagraph, sell-back and buy-back arrangements, debt defeasances, and assignments of income);— (c) but does not include any excepted ﬁnancial arrangement that is not part of a ﬁnancial arrangement ﬁxed principal ﬁnancial arrangement means any ﬁnancial arrangement other than a variable principal debt instrument forward contract, in the deﬁnitions of holder and implemen- tation date, includes, but is not limited to, a forward contract for— (a) (b) (c) (d) but does not include an agreement for the sale and purchase of property or a speciﬁed option holder— (a) means,— (i) foreign exchange: commodities: ﬁnancial arrangements: excepted ﬁnancial arrangements;— in relation to— (A) an agreement for the sale and purchase of property; or a forward contract or a futures contract,— (B) a person who is a vendor in relation to the ﬁnan- cial arrangement: in relation to an option to purchase or otherwise acquire property, a person who is a grantor of the option: (ii) 1200
 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 48 (iii) (iv) (v) in relation to an option to sell or otherwise dis- pose of property, a person who is a grantee of the option: in relation to a hire purchase agreement, lessor: in relation to any other ﬁnancial arrangement, a person who, if the amount or amounts payable under the ﬁnancial arrangement were due and payable at that time, would be entitled to receive, or would receive a pecuniary beneﬁt from, pay- ment of the amount or amounts so
 payable or any part of them;— the (b) and hold has a corresponding meaning; and is further deﬁned in section EZ 38(8) for the purposes of that section implementation date means,— (a) in the case of— (i) (ii) (iii) (iv) (v) foreign exchange: commodities: ﬁnancial arrangements: excepted ﬁnancial arrangements; and forward or future contracts, including, but not limited to, contracts for— (A) (B) (C) (D) futures contracts; and trade credits; and annuities; and agreements for the sale and purchase of property; and convertible notes,— (vi) 8.00 pm New Zealand Standard Time on 23 October 1986; and in the case of debt defeasances and assignments of in- come, 20 December 1986; and in the case of variable principal debt instruments, 1 April 1987; and in the case of a ﬁnancial arrangement under which— (i) the monetary obligations of the parties are ex- pressed in New Zealand currency; and (b) (c) (d) 1201 Part E s EZ 48 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) (iii) it is contemplated that the holder may, upon de- mand or call, require the return of sums advanced to the issuer; and it is not contemplated that the holder may ad- vance further sums to the issuer upon demand or call under the ﬁnancial arrangement,— (e) 1 April 1987; and in every other case, 8.30 pm New Zealand Standard Time on 31 July 1986 issuer,— (a) (b) in relation to a ﬁnancial arrangement at any time, means a person who is a party to the ﬁnancial arrangement and is not a holder in relation to
 the ﬁnancial arrangement; and is further deﬁned in section EZ 38(8) for the purposes of that section maturity, in relation to a ﬁnancial arrangement, means the date on which the last payment contingent upon the ﬁnancial arrangement is made, and matures has a corresponding mean- ing provided that where a ﬁnancial arrangement has not matured and where the amount which has not been paid is immate- rial and the ﬁnancial arrangement has been structured to avoid the application of section EZ 38, the ﬁnancial
 arrangement is deemed to have matured in paragraph (b) of the deﬁnition of ﬁnancial money, arrangement and in the deﬁnition of security payment, in- cludes money’s worth, whether or not convertible into money, and the right to money, including the deferral or cancellation of any obligation to pay money whether in whole or in part private or domestic agreement for the sale and purchase of property, in the deﬁnition of excepted ﬁnancial arrange- ment, in relation to any person, means an agreement for the sale and purchase of property or a speciﬁed option where— (a) the agreement was entered into by that person or the speciﬁed option was granted to or by that person for private or domestic purposes; and the subject-matter of the agreement or speciﬁed option is— (b) 1202 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 48 (i) (ii) real property, the purchase price of which is less than $750,000; or any other property, the purchase price of which is less than $250,000; and (c) settlement is required to take place within 365 days after the day on which the agreement was entered into or the speciﬁed option granted property,— (a) (b) in the deﬁnition of speciﬁed base cost for 1983 income year property and in the life insurance rules, includes any real or personal property; and in paragraph (a) of the deﬁnition of holder and para- graph (c) of the deﬁnition of lease and in the deﬁnitions of agreement for the sale and purchase of property, amount of all
 consideration, core acquisition price, excepted ﬁnancial arrangement, private or domes- tic agreement for the sale and purchase of property, right in the speciﬁed property, short term agreement for the sale and purchase of property, short term op- tion, and speciﬁed option, means— (i) any capital asset that is not foreign exchange or a ﬁnancial arrangement; and trading stock; and consumable aids; and property to be purchased or otherwise acquired or sold or otherwise disposed of for private or domestic purposes
 only (ii) (iii) (iv) right in the speciﬁed property, in the deﬁnition of core ac- quisition price, means— (a) (b) the right to possession of the property; or the right to any income or the right to control or inﬂu- ence the disposition of income derived from the prop- erty; or the right, directly or indirectly, to exercise, or to in- ﬂuence any other person in the exercise of, any deci- sion-making in respect of the property; or any other right of a substantially similar nature: (c) (d) 1203 Part E s EZ 48 Income Tax Act 2007 Reprinted as at 1 January 2010 provided that the mere right to enforce any agreement for the sale and purchase of property or any speciﬁed option does not of itself constitute a right in the speciﬁed property secured arrangement, in the deﬁnitions of security arrange- ment and security payment, means an arrangement against which the failure to perform is secured by a ﬁnancial arrange- ment security arrangement, in the deﬁnition of security payment, means a ﬁnancial arrangement that secures the holder against failure of any person to perform their obligations under a se- cured arrangement security payment means money received by the holder of a security arrangement to the extent that the money is received in relation to a loss incurred due to the failure of performance of the secured arrangement and the value of the money is income of the holder short term agreement for the sale and purchase of prop- erty means an agreement for the sale and purchase of property where— (a) the property is real property and settlement is required to take place within 93 days of the day on which the agreement was entered into; or the property is not real property and settlement is re- quired to take place within 63 days of the day on which the agreement was entered into (b) short-term option, in the deﬁnition of excepted ﬁnancial ar- rangement, means a speciﬁed option where— (a) the subject-matter of the option is real property and settlement is required to take
 place within 93 days of the day on which the option was granted; or the subject-matter of the option is not real property and settlement is required to take place within 63 days of the day on which the option was granted (b) short term trade credit, in the deﬁnitions of core acquisition price, excepted ﬁnancial arrangement, and trade credit, 1204 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 48 means any debt for goods or services where payment is re- quired by the vendor— (a) within 63 days after the supply of the goods or services; or because the supply of the goods or services is continu- ous and the vendor renders periodic invoices for the goods or services, within 63 days after the date of an invoice rendered for those goods or services (b) social assistance suspensory loan is deﬁned in section EZ 38(8)(c) for the purposes of that section speciﬁed option means an option to purchase or otherwise ac- quire or sell or otherwise dispose of property, and the agree- ment for the sale and purchase of property, if any, entered into as a result of the exercise of the option is deemed to be part of the option trade credit, in the deﬁnitions of core acquisition price and implementation date, means any debt for goods or services, but does not include a short term trade credit trading stock, in paragraph (b) of the deﬁnition of property, means— (a) any thing acquired for the purposes of manufacture, sale, or exchange: livestock: any other real or personal property where the business of the person by whom it is sold or disposed of com- prises dealing in such property or the property was ac- quired by the person for the purpose of sale or other disposal: any land, any amount derived from the sale or other disposal of which would be income to which any of sections CB 6 to CB 23 applies: anything in respect of which expenditure is incurred and which, if possession were taken, would fall within any of paragraphs (a) to (d);— (b) (c) (d) (e) but does not
 include any ﬁnancial arrangement variable principal debt instrument means a bank deposit ac- count or other ﬁnancial arrangement where it is contemplated that the holder may— (a) advance further sums to the issuer; or 1205 Part E s EZ 49 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) where the rights and obligations of the person under the ﬁnancial arrangement are expressed in a currency other than New Zealand currency, require the return of sums advanced to the issuer— in either case upon demand or call, and where all such sums form part of that bank deposit account or other instrument.
Compare: 2004 No 35 s EZ 45 EZ 49 Determination of core acquisition price where (1) consideration for property denominated in foreign currency For the purposes of paragraph (c) of the deﬁnition of core ac- quisition price in section EZ 48, if the consideration payable under the relevant ﬁnancial arrangement for the speciﬁed property is denominated in a foreign currency, the lowest price referred to in that paragraph must be the lowest price the parties would have agreed upon in that foreign currency converted into New Zealand dollars using, at the option of the taxpayer,— (a) the rate, on the day on which the ﬁnancial arrange- ment was entered into (in this section referred to as the contract date), available to the taxpayer from a New Zealand registered bank for the exchange of New Zealand dollars for that foreign currency on the day on which the ﬁrst right in the speciﬁed property is to be transferred (in this section referred to as the rights date); or if the period between the rights date and the day on which ﬁnal payment is to be made under the ﬁnancial ar- rangement (in this section referred to as the settlement date) is not greater than 5 years, the rate, on the con- tract date, available to the taxpayer from a New Zealand registered bank for the exchange of New Zealand dol- lars for that foreign currency on the settlement date; or an exchange rate approved by the Commissioner for adoption under this subsection in the circumstances ap- plicable to the taxpayer in a determination issued under section 90(1)(k) of the Tax Administration Act 1994.
(b) (c) 1206 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 50 (2) (3) (4) The rate adopted by a taxpayer in relation to a ﬁnancial ar- rangement under subsection (1) must be consistently applied by that taxpayer in respect of that particular ﬁnancial arrange- ment for the purposes of the old ﬁnancial arrangements rules for every income year during its term.
If the terms of the ﬁnancial arrangement referred to in subsec- tion (1) are such that the actual rights date is uncertain as at the contract date, then the rights date is for the purposes of sub- section (1) the date on which it is reasonably expected by the parties at the time of entering into the ﬁnancial arrangement that the ﬁrst right in the speciﬁed property will be transferred.
If the terms of the ﬁnancial arrangement referred to in subsec- tion (1) are such that the actual settlement date is uncertain as at the contract date, then the settlement date is for the purposes of subsection (1) the date on which it is reasonably expected by the parties at the time of entering into the ﬁnancial arrange- ment that ﬁnal payment will be made.
Compare: 2004 No 35 s EZ 46 EZ 50 Rules for non-market transactions (1) Where the Commissioner, having regard to any connection be- tween the parties to the issue or transfer of a ﬁnancial arrange- ment and to any other relevant circumstances, is satisﬁed that the parties were dealing with each other in relation to the issue or transfer in a manner that has the effect of defeating the in- tent and application of the old ﬁnancial arrangements rules, the Commissioner may, under section EZ 35 or EZ 37 or EZ 38 or EZ 42, deem the consideration for the issue or trans- fer to be equal to the consideration that might reasonably be expected for the issue or transfer if the parties to the issue or transfer were independent parties dealing at arm’s length with each other in relation to the issue or transfer.
If at any time a person not resident in New Zealand— (a) (2) commences to hold, whether temporarily or otherwise, a ﬁnancial arrangement, for the purposes of a busi- ness carried on through a ﬁxed establishment in New Zealand, the person is deemed to have acquired the ﬁnancial arrangement at that time; or 1207 Part E s EZ 51 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) ceases to hold, whether temporarily or otherwise, a ﬁ- nancial arrangement for the purposes of a business car- ried on through a ﬁxed establishment in New Zealand, the person is deemed to have disposed of the ﬁnancial arrangement at that time; or being a holder or an issuer of a ﬁnancial arrangement, becomes a New Zealand resident, the person is deemed to acquire or to issue the ﬁnancial arrangement at the time at which the person becomes a New Zealand resi- dent;— and that acquisition or that disposal is deemed to have been made for a consideration equal to the consideration that might reasonably be expected for the acquisition or disposal if the acquisition or disposal had been made at arm’s length.
A ﬁnancial arrangement is treated as having been sold and purchased or transferred and realised at its market value on the date of its sale or transfer if the sale or transfer, including a transfer by way of distribution to shareholders, is not for consideration in money or is for a consideration that is less than the market value of the ﬁnancial arrangement.

The market value of a ﬁnancial arrangement is the market value for both seller and purchaser or transferor and transferee.
Compare: 2004 No 35 s EZ 47 (3) (4) EZ 51 Transitional adjustment when changing to ﬁnancial arrangements rules A person may elect to apply the ﬁnancial arrangements rules to a ﬁnancial arrangement to which the old ﬁnancial arrange- ments rules apply.

A person who makes an election must apply the ﬁnancial ar- rangements rules to all ﬁnancial arrangements to which the person is a holder or an issuer.
Despite subsections (1) and (2), a person must apply section EZ 38 if that section applies to a ﬁnancial arrangement in the income year in which the election is made.

Once an election is made, the ﬁnancial arrangement is subject to the ﬁnancial arrangements rules and is treated in the same (1) (2) (3) (4) 1208 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 51 (5) (6) way as a ﬁnancial arrangement that was entered into on or after 20 May 1999.
A person who makes an election must calculate a transitional adjustment for the income year of election and return the re- sulting income or expenditure.
The transitional adjustment is calculated using the formula— income (ﬁnancial arrangements rules) - expenditure (ﬁnancial arrangements rules) - income (old ﬁnancial arrangements rules) + expenditure (old ﬁnancial arrangements rules) where— income (ﬁnancial arrangements rules) is the total amount of income that would be derived by the person from the ﬁnancial arrangement if the ﬁnancial arrangements rules were applied to the ﬁnancial arrangement for the period beginning on the date the person acquires the arrangement and ending on the last day of the income year in which this calculation is made expenditure (ﬁnancial arrangements rules) is the total amount of expenditure that would be incurred by the person under the ﬁnancial arrangement if the ﬁnancial arrangements rules were applied to the ﬁnancial arrangement for the period beginning on the date the person acquires the arrangement and ending on the last day of the income year in which this calculation is made income (old ﬁnancial arrangements rules) is the total amount of income of the person from the ﬁnancial arrange- ment in all income years before the income year in which this calculation is made expenditure (old ﬁnancial arrangements rules) is the total amount of expenditure incurred by the person under the ﬁnan- cial arrangement in all income years before the income year in which this calculation is made.
The result of the transitional adjustment is,— (a) if a positive amount, income derived by the person in the income year; and if a negative amount, expenditure incurred by the person in the income year.
(b) (7) (8) In the income year in which the transitional adjustment is made to a ﬁnancial arrangement, a person must take into account 1209 Part E s EZ 52 Income Tax Act 2007 Reprinted as at 1 January 2010 (9) only the income derived or the expenditure incurred as a result of the adjustment for the ﬁnancial arrangement.
Despite subsections (2) to (8), a person is treated as transfer- ring a ﬁnancial arrangement at market value at the end of the income year of election and must calculate a base price adjust- ment under section EZ 38 if— (a) the ﬁnancial arrangement is an arrangement to which the old ﬁnancial arrangements rules apply; and the ﬁnancial arrangement were entered into on or after 20 May 1999 and would not have been subject to the ﬁnancial arrangements rules; and the person elects to apply the ﬁnancial arrangements rules to a ﬁnancial arrangement to which the old ﬁnan- cial arrangements rules apply.
(b) (c) Compare: 2004 No 35 s EZ 48 EZ 52 References to new rules include old rules (1) Subsection (2) applies if— (a) (c) (b) (d) the old ﬁnancial arrangement rules apply to a ﬁnancial arrangement (old ﬁnancial arrangement); and a taxation law in this Act (rewritten law) refers only to, or applies only to, a ﬁnancial arrangement to which the ﬁnancial arrangements rules apply; and the rewritten law is in neither subpart EW nor sections EZ 33 to EZ 51; and the rewritten law corresponds to and replaces, with or without amendments, a taxation law that applied to the old ﬁnancial arrangement before 20 May 1999.
The rewritten law applies to the old ﬁnancial arrangement as if the rewritten law referred to, or applied to, a ﬁnancial arrange- ment to which the old ﬁnancial arrangements rules apply.

Subsection (2) does not apply to— (a) a deﬁnition, or parts of a deﬁnition, in section YA 1 if that deﬁnition or part refers to section EZ 48; or section GB 21, because the former taxation law to which it corresponds has been re-enacted as section EZ 50.
(b) Section FM 8(3)(b)(ii) applies to a ﬁnancial arrangement to which the old ﬁnancial arrangements rules apply as if— (2) (3) (4) 1210 Reprinted as at 1 January 2010 Income Tax Act 2007 Part E s EZ 52B (a) (b) the reference to section EW 31 were to section EZ 38; and the words “ﬁnancial arrangements rules” read “old ﬁ- nancial arrangements rules”.
Compare: 2004 No 35 s EZ 49 EZ 52B Consistency of use of IFRS method: Determination G3 change allowed (1) (2) When this section applies This section applies to a ﬁnancial arrangement of a person— for the 2009–10 income year, unless paragraph (b) or (a) (c) applies: for the 2008–09 or the 2009–10 income year (a retro- spective year) if— (i) (b) (ii) the ﬁnancial arrangement is subject to a creditor workout in a retrospective year; and the person notiﬁes the Commissioner in writing of their election to apply this section to the ﬁnan- cial arrangement for a retrospective year: for an income year after the 2009–10 income year, if— the ﬁnancial arrangement is subject to a creditor (i) workout in the relevant income year; and the person notiﬁes the Commissioner in writing of their election to apply this section to the ﬁnan- cial arrangement for the relevant income year be- fore the last day for ﬁling a return of income for that income year.
(ii) (c) Exception modiﬁed For the purposes of the exception in section EW 25B(2) (Con- sistency of use of IFRS method), the person may change a method for IFRS for the ﬁnancial arrangement if— (a) the method they change to or from is Determination G3 under section EW 15E(2)(aa) (Determination alterna- tives) or an alternative to Determination G3 under sec- tion EW 15E(2)(e) (What is included when spreading methods used); and that method is available to them to use.
(b) Deﬁned in this Act: creditor workout, ﬁnancial arrangement, IFRS, income year 1211 Part F s FA 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Section EZ 52B: added (with effect on 1 April 2008), on 6 October 2009, by section 198 of the Taxation (International Taxation, Life Insurance, and Remed- ial Matters) Act 2009 (2009 No 34).
Section EZ 52B(2)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 40 of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Part F Recharacterisation of certain transactions Subpart FA—Recharacterisation of certain commercial arrangements Introductory provision FA 1 What this subpart does This subpart alters the tax treatment of certain commercial ar- rangements by— (a) recharacterising either their nature or that of the amounts derived under the arrangements; and providing rules for the treatment of the parties to the arrangement.
(b) Deﬁned in this Act: amount, arrangement, tax Debentures and shares FA 2 Recharacterisation of certain debentures Treatment of debenture and interest A proﬁt-related debenture or a substituting debenture is treated for tax purposes as a share described in paragraph (b) of the deﬁnition of share in section YA 1 (Deﬁnitions), and the in- terest payable under the debenture is treated as a dividend.
No deduction A company issuing either a proﬁt-related debenture or a sub- stituting debenture is denied a deduction under section DB 10 (Interest or expenditure connected to proﬁt-related or substi- tuting debentures) for— (a) (b) interest payable under the debenture; or expenditure or loss incurred in connection with the debenture; or (1) (2) 1212 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FA 2 (3) (4) (5) (c) expenditure or loss incurred in borrowing the money secured by or owing under the debenture.
When interest ﬁxed to certain rates or indices [Repealed] [Repealed] Proﬁt-related debenture A proﬁt-related debenture— (a) means a debenture with a rate of interest that is set from time to time by reference to— (i) the dividend payable by the company issuing the debenture; or the proﬁts of the company issuing the debenture, however measured: (ii) (b) (c) does not include a debenture under which the interest payable is determined by a ﬁxed relationship to— (i) (ii) (iii) banking rates; or general commercial rates; or economic, commodity, industrial, or ﬁnancial in- dices, but the application of this subparagraph is subject to section FZ 1(3) (Treatment of interest payable under debentures issued before certain date): does not include a debenture treated as a share under section FA 2B (Stapled debt securities).
Substituting debenture Substituting debenture— (a) means a debenture issued by a company to a share- holder or class of shareholders of the company when the amount of the debenture is determined by reference to 1 or more of the following aspects of the shares in the company or another company held by the shareholder or class of shareholder at the time the debenture is issued or at an earlier time: (i) (ii) the number of shares: the available subscribed capital of the relevant company calculated under the slice rule set out in section CD 23 (Ordering rule and slice rule): some other reference to the shares: (iii) 1213 Part F s FA 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) (d) includes a debenture issued to a shareholder or a class of shareholder when the amount of the debenture is deter- mined by reference to 1 or more aspects of the shares as described in paragraph (a) held by the shareholder in a company other than that issuing the debenture, whether or not the company is being, or has been, liquidated: does not include a debenture that is a convertible note: does not include a debenture treated as a share under section FA 2B.
Shares or available subscribed capital in another company [Repealed] [Repealed] Amount of debenture For the purposes of subsection (5), the amount of the deben- ture means the principal sum secured by or owing under the debenture.

Terminating provisions For the treatment of debentures issued before 8pm New Zealand standard time on 23 October 1986, see section FZ 1.
Relationship with agency rules Section HD 14 (Companies issuing debentures) does not apply to a proﬁt-related debenture described in this section, or to an amount paid or payable under it.
Deﬁned in this Act: amount, available subscribed capital, company, convertible note, debenture, deduction, dividend, interest, liquidation, loss, pay, proﬁt-re- lated debenture, share, shareholder, slice rule, substituting debenture, tax Compare: 2004 No 35 ss FC 1, FC 2 Section FA 2(3) heading: repealed (with effect on 1 April 2008), on 6 October 2009, pursuant to section 201(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FA 2(3): repealed (with effect on 1 April 2008), on 6 October 2009, by section 201(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FA 2(4): substituted (with effect on 1 April 2008), on 6 October 2009, by section 201(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FA 2(4)(b)(iii): amended (with effect on 1 April 2008), on 6 October 2009, by section 201(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

(6) (7) (8) (9) 1214 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FA 2B Section FA 2(4)(c): added (with effect on 1 April 2008), on 6 October 2009, by section 201(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FA 2(5): substituted (with effect on 1 April 2008), on 6 October 2009, by section 201(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FA 2(5)(c): amended (with effect on 1 April 2008), on 6 October 2009, by section 201(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FA 2(5)(d): added (with effect on 1 April 2008), on 6 October 2009, by section 201(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FA 2(6) heading: repealed (with effect on 1 April 2008), on 6 October 2009, pursuant to section 201(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FA 2(6): repealed (with effect on 1 April 2008), on 6 October 2009, by section 201(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FA 2(7): substituted (with effect on 1 April 2008), on 6 October 2009, by section 201(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FA 2B Stapled debt securities (1) (2) When subsection (2) applies Subsection (2) applies when— (a) (b) a company has issued a debt security; and the debt security is stapled to a share in the company or to a share in another company; and the share is not a ﬁxed-rate share.
(c) Stapled debt treated as equity The stapled debt security is treated as a share issued by the company and— (a) interest payable under the stapled debt security is treated as a dividend; and section DB 10B (Interest or expenditure connected to stapled debt security) may deny deductions for expend- iture or loss related to the security.
(b) (3) Stapled securities aggregated A stapled debt security and a share to which it is stapled are treated as a single share for the purposes of applying— 1215 Part F s FA 2B Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) (c) the deﬁnition of non-participating redeemable share in section CD 22(9) (Returns of capital: off-market share cancellations); and [Repealed] the deﬁnitions, in section YA 1 (Deﬁnitions), of— (i) (ii) ﬁxed-rate foreign equity; and ﬁxed-rate share, except for the purposes of sub- section (1)(c).
Meaning of debt security In this section, debt security means a ﬁnancial arrangement if— (a) the ﬁnancial arrangement provides funds to the com- pany; and the ﬁnancial arrangement gives rise to an amount for which the company would have a deduction but for this section; and the amount does not arise only from either a movement in a currency exchange rate or a non-contingent fee.
(b) (c) Meaning of stapled In this section, a debt security is stapled to a share if— (a) the debt security can, or ordinarily can, be disposed of only together with the share; and the arrangement that requires the debt security and the share to be disposed of together is an arrangement to which the company that issued the debt security or the company that issued the share is a party.
(b) Exclusion: small company shareholder agreements This section does not apply if the debt security is stapled to the share using a shareholder agreement for a company that is not a widely-held company.

Exclusion: stapling before 25 February 2008 This section does not apply if the debt security was stapled to the share before 25 February 2008.
Deﬁned in this Act: amount, associated person, company, debt security, deduc- tion, dividend, ﬁnancial arrangement, ﬁxed-rate share, interest, non-contingent fee, share, shareholder agreement, stapled, widely-held company Section FA 2B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 202(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
(4) (5) (6) (7) 1216 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FA 4 Section FA 2B(3)(b): repealed (with effect on 30 June 2009), on 6 October 2009, by section 202(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FA 3 Recharacterisation of certain dividends: recovery of cost of shares held on revenue account (1) (2) (3) When this section applies This section applies to the amount of a dividend derived from shares that are revenue account property of a person when— the payment of the dividend realises or recovers the (a) price the person paid for the shares; and the payment is made at the person’s control or direction, or is part of a scheme that includes the acquisition of the shares and the payment of the dividend.
(b) Treatment of amount derived The dividend is treated as an amount derived on a sale of the shares to the extent to which the actual amount realised by the person on the disposal of the shares is less than the cost to the person of acquiring the shares.

Dividend Despite subsection (2), a dividend taken into account under this section remains a dividend derived by the person in the income year.
Deﬁned in this Act: amount, control, dividend, income year, pay, revenue ac- count property, share Compare: 2004 No 35 s FC 3 FA 4 Recharacterisation of shareholder’s base: company repurchasing share (1) When this section applies This section applies to a shareholder in a company in relation to an off-market cancellation of shares by the company under section CD 22 (Returns of capital: off-market share cancella- tions) when— (a) the shareholder holds the share as revenue account prop- erty; and after the cancellation, they continue to hold some shares of the same class.
(b) 1217 Part F s FA 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) When whole amount treated as dividend If the whole of the amount that the shareholder receives for the cancellation is treated as a dividend, the following paragraphs apply: (a) the shareholder is not regarded as having disposed of the cancelled share, except for the purpose of determining whether they have derived a dividend; and the amount is added to the cost of the shareholder’s re- maining shares of the same class under subsection (6).
(b) Below market value of shares If subsection (2) does not apply, and the amount paid by the company is less than the market value of the shares at the time when notice is ﬁrst given of the cancellation either by the shareholder or the company, the following paragraphs apply: an amount calculated using the formula in subsection (a) (4) is added to the cost of the shareholder’s remaining shares of the same class under subsection (6); and the amount is excluded from the cost of the share being cancelled so that the shareholder is denied a deduction under section DB 25 (Cancellation of shares held as rev- enue account property) for the amount unless the share is trading stock of the shareholder; and sections GC 1 and GC 2 (which relate to the disposal of trading stock for inadequate consideration) does not apply.
(b) (c) Formula The formula referred to in subsection (3)(a) is— (4) Deﬁnition of items in formula In the formula,— (a) share cost is the cost of the cancelled share to the share- holder: cost pre-cancellation is the total cost to the shareholder of all their shares of the same class immediately before the cancellation: amount from cancellation is the amount derived by the shareholder from the company for the cancellation: (b) (c) (5) 1218 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FA 5 (6) (7) (d) market value is the total market value of all the share- holder’s shares of the same class immediately before the cancellation.
When subsection (7) applies Subsection (7) applies at a time after the cancellation when the cost of the remaining shares is taken into account under sub- part EB (Valuation of trading stock (including dealer’s live- stock)), or otherwise.

Adding amount to cost of shares The amount referred to in subsection (2)(b) or (3)(a) must be fairly divided among, and added to, the cost of the share- holder’s remaining shares of the same class.
Deﬁned in this Act: amount, company, deduction, dividend, market value, notice, off-market cancellation, revenue account property, share, shareholder, shares of the same class, trading stock Compare: 2004 No 35 s FC 4 Leases FA 5 Assets acquired and disposed of after deduction of payments under lease (1) plant, machinery, or other equipment; or a motor vehicle; or a temporary building; and When this section applies This section applies when a person (the lessee)— leases, rents, or hires an asset that is— (a) (i) (ii) (iii) is allowed a deduction for the rental payments; and acquires the asset and later disposes of it; and the consideration derived on the disposal is not income of the lessee under a provision of this Act other than this section.
(b) (c) (d) (2) Income If the consideration derived by the lessee for the asset is more than the cost of its acquisition, the excess is income of the lessee under section CG 7 (Recoveries after deduction of pay- ments under lease).

Subsection (3) overrides this subsection.


1219 Part F s FA 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) (6) (7) Adjustment to income If the total amount of the deductions referred to in subsection (1)(b) is less than or equal to the excess, the amount of income under subsection (2) is the total amount of the deductions.

Apportionment If the asset is disposed of together with other assets, the total consideration must be apportioned to reﬂect the respective market values of the assets.
Disposal below market value If the asset is disposed of without consideration or for a con- sideration that is less than market value at the date of disposal, the asset is treated as having been disposed of at its market value.

Associated persons acquiring asset Subsection (2) also applies if a person associated with the lessee acquires the asset, whether from the lessee or not, and disposes of it for an amount that is more than the amount paid to acquire it.
Association is determined at the time of acquisi- tion by the associated person.

The lesser of the excess and the total amount of the lessee’s deductions is treated as income of the lessee.

Transfers on settlement of relationship property In this section,— (a) subsection (1)(c) does not apply to an acquisition on a settlement of relationship property: subsection (5) does not apply to a disposal on a settle- ment of relationship property.
(b) Deﬁned in this Act: amount, associated person, deduction, income, lease, lessee, market value, pay, settlement of relationship property, temporary building Compare: 2004 No 35 s FC 5 Finance leases FA 6 Recharacterisation of amounts derived under ﬁnance leases When a personal property lease asset is leased under a ﬁnance lease, the lease is treated as a sale of the lease asset by the 1220 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FA 8 lessor to the lessee on the date on which the term of the lease starts, and— (a) the lessor is treated as giving a loan to the lessee for the lease asset; and the lessee is treated as using the loan to buy the lease asset; and subpart EE (Depreciation), the ﬁnancial arrangements rules, and the other provisions of this Act apply to the arrangement as recharacterised.
(b) (c) Deﬁned in this Act: ﬁnance lease, ﬁnancial arrangements rules, lessee, lessor, loan, personal property lease asset, term of the lease Compare: 2004 No 35 ss FC 8A(1), FC 8F, FC 8G FA 7 Determining amount of loan (1) (2) Value to lessor For a lessor under a ﬁnance lease, the amount of the loan is de- termined under section EW 32 (Consideration for agreement for sale and purchase of property or services, hire purchase agreement, speciﬁed option, or ﬁnance lease).
Value to lessee For a lessee under a ﬁnance lease, the amount of the loan is determined under sections EW 32 and EW 33 (which relate to the value of consideration under the ﬁnancial arrangements rules).
Deﬁned in this Act: amount, ﬁnance lease, lessee, lessor Compare: 2004 No 35 ss FC 8A(2), (3), OB 1 consideration, lessee’s acquisi- tion cost, lessor’s disposition value FA 8 Deductibility of expenditure under ﬁnance lease (1) Lessee treated as owner The lessee under a ﬁnance lease is treated as the owner of the personal property lease asset for the purposes of subpart EE (Depreciation).
1221 Part F s FA 9 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Lessor not treated as owner The lessor under a ﬁnance lease is not treated as the owner of the personal property lease asset for the purposes of subpart EE.
Deﬁned in this Act: ﬁnance lease, lessee, lessor, personal property lease asset Compare: 2004 No 35 s FC 8B(1) FA 9 Treatment when lease ends: lessee acquiring asset Acquisition treated as sale (1) When a lessee under a ﬁnance lease acquires the personal property lease asset by the date on which the term of the lease ends, the acquisition is treated as the same sale that is treated as occurring under section FA 6.
When lessee or associated person acquires lease asset and later disposes of it If a lessee under a ﬁnance lease, or a person associated with them, acquires the lease asset and later disposes of it for an amount that is more than the consideration they paid for it, the excess is income of the lessee under section CC 11 (Lessee acquiring lease asset on expiry of term of lease).
Allocation and association For the purposes of subsection (2),— (a) the excess is income of the lessee in the income year in which the lessee or associated person disposes of the asset: association is determined at the time of acquisition by the associated person.

(b) Exception Subsection (2) does not apply if the consideration derived on the disposal is income of the lessee or an associated person under a provision of this Act other than this section.
Deﬁned in this Act: amount, associated person, ﬁnance lease, income, income year, lessee, personal property lease asset, term of the lease Compare: 2004 No 35 ss FC 8B(2), FC 8E (2) (3) (4) 1222 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FA 10 FA 10 Treatment when lease ends: lessor acquiring asset (1) (2) (3) (4) (5) (6) When this section applies This section applies when a ﬁnance lease ends by the date on which its term ends.
Acquisition by lessor at end of lease If the lessee does not acquire the personal property lease as- set by the date on which the term of the lease ends, the lessor is treated as having acquired it on that date at its guaranteed residual value.

If there is no guaranteed residual value, the consideration is treated as zero.

In this section, the consider- ation is called the notional sale price.
Further sale, assignment, or lease Subsections (4) and (5) apply when the lessor sells, assigns, or leases the lease asset to another person under another ﬁnance lease on or after the date on which the term of the original lease ends.
When consideration more than notional sale price If the consideration is more than the notional sale price,— (a) to the extent to which it is paid by the lessor to the lessee under the original ﬁnance lease, the notional sale price is increased by the amount of the difference; and to the extent to which it is not paid by the lessor to the lessee under the original ﬁnance lease, the amount of the difference is income of the lessor under section CC 12 (Lessor acquiring lease asset on expiry of term of lease) in the income year in which the original lease term ends.
(b) When consideration less than notional sale price If the consideration is less than the notional sale price, and the lessee is required to pay the amount of the deﬁcit to the lessor, the notional sale price is reduced by that amount.

Acquisition by lessor when lease ends early If the lease is terminated before the end of its term and the lessee does not acquire the lease asset, the lessor is treated as acquiring it for an amount calculated using the formula— outstanding balance − release payment.
Deﬁnition of items in formula In the formula,— (7) 1223 Part F s FA 11 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) outstanding balance is the amount of the outstanding balance of the loan on the date on which the lease is terminated: release payment is the amount the lessee paid to be released from their obligations under the lease.

Relationship with section EE 45 Subsections (2) to (6) override section EE 45 (Consideration for purposes of section EE 44).
Deﬁned in this Act: amount, ﬁnance lease, guaranteed residual value, income, lease, lessee, lessor, loan, notional sale price, outstanding balance, pay, personal property lease asset, term of the lease Compare: 2004 No 35 ss FC 8B(3), FC 8C, FC 8D (8) FA 11 Adjustments for leases that become ﬁnance leases When this section applies This section applies when a lease is entered into on or after 20 May 1999 and— (a) the lease is a consecutive or a successive lease— (i) that is treated as 1 lease under the deﬁnition of lease ; and (ii) with a term of the lease that the lessor and lessee do not contemplate, at the start of the term, will be more than 75% of the personal property lease asset’s estimated useful life; and (iii) with a term of the lease that is more than 75% of the asset’s estimated useful life: (b) the lease is an operating lease that becomes a ﬁnance lease under paragraph (c) of the deﬁnition of ﬁnance lease.
Adjustment required The lessor and lessee must each adjust their income and ex- penditure calculated for the lease by including an adjustment in a return of income for the tax year corresponding to the in- come year in which the lease becomes a ﬁnance lease.
Amount of adjustment The amount of the adjustment is calculated for the relevant person in relation to the period described in subsection (5) us- ing the formula— (1) (2) (3) 1224 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FA 11B ﬁnance income − ﬁnance expenditure − unadjusted income + unadjusted expenditure.
(4) (5) (6) (7) Deﬁnition of items in formula In the formula,— (a) ﬁnance income is the income that would have been de- rived by the person under the lease if the lease were a ﬁnance lease for the period: ﬁnance expenditure is the expenditure that would have been incurred by the person under the lease if the lease were a ﬁnance lease for the period: unadjusted income is the income derived by the person under the lease: unadjusted expenditure is the expenditure incurred by the person under the lease.
(b) (c) (d) Adjustment period The period starts on the date on which the lease starts and ends on the last day of the income year in which the lease becomes a ﬁnance lease.

Adjustment positive If the adjustment is positive, the amount is income of the rele- vant person under section CH 6 (Adjustments for certain ﬁ- nance and operating leases).
Adjustment negative If the adjustment is negative, the amount is a deduction of the relevant person under section DB 51B (Adjustments for leases that become ﬁnance leases).
Deﬁned in this Act: amount, estimated useful life, ﬁnance lease, income, in- come year, lease, lessee, lessor, operating lease, personal property lease asset, return of income, tax year, term of the lease Compare: 2004 No 35 s FC 8H Section FA 11: substituted, on 1 April 2008, by section 406 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
FA 11B Adjustments for certain operating leases (1) When this section applies This section applies when a lease is an operating lease that— is entered into on or after 20 May 1999 and before 20 (a) June 2007; and 1225 Part F s FA 11B Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) (d) is an arrangement, or part of an arrangement that, on 20 June 2007, meets the requirements of paragraph (c)(i) to (iii) of the deﬁnition of ﬁnance lease; and has a term of the lease ending after the end of the income year in which 20 June 2007 falls (the adjustment year); and does not meet the requirements of section FA 11(1) be- fore the end of the income year after the adjustment year.
Adjustment required The lessor must adjust their income and expenditure calculated for the lease asset by including an adjustment in a return of income for the tax year corresponding to the income year after the adjustment year.

Amount of adjustment The amount of the adjustment is calculated using the for- mula— total depreciation losses 6.
Deﬁnition of item in formula In the formula, total depreciation losses is the total amount of depreciation loss for the lease asset for which the lessor is allowed a deduction in the period that begins with the start of the term of the lease and ends with the end of the adjustment year.

Income The amount of the adjustment is income of the lessor under the lease under section CH 6 (Adjustments for certain ﬁnance and operating leases) in the income year after the adjustment year.
Adjusted tax value The adjusted tax value of the lease asset at the beginning of the income year after the adjustment year is the total of the amount of the adjustment and the adjusted tax value that the lease asset would have in the absence of this section.
Depreciation loss For an income year beginning after 20 June 2007 in which the lease is an operating lease, the amount of depreciation loss (2) (3) (4) (5) (6) (7) 1226 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FA 13 allowed for the lease asset other than under section EE 48 (Ef- fect of disposal or event) is ﬁve-sixths of the amount of de- preciation loss that would be allowed for the lease asset in the absence of this subsection.
Deﬁned in this Act: adjusted tax value, amount, arrangement, deduction, depre- ciation loss, ﬁnance lease, income, income year, lease, lessee, lessor, operating lease, return of income, tax year, term of the lease Compare: 2004 No 35 s FC 8I Section FA 11B: inserted, on 1 April 2008, by section 406 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
Hire purchase agreements FA 12 Recharacterisation of amounts derived under hire purchase agreements When a person (the seller) provides personal property other than livestock or bloodstock to another person (the buyer) under a hire purchase agreement, the agreement is treated as a sale by the seller to the buyer on the date on which the term of the agreement starts, and— (a) the seller is treated as giving a loan to the buyer for the property; and the buyer is treated as using the loan to buy the property; and subpart EE (Depreciation), the ﬁnancial arrangements rules, and the other provisions of this Act apply to the agreement as recharacterised.
(b) (c) Deﬁned in this Act: amount, bloodstock, ﬁnancial arrangements rules, hire pur- chase agreement, loan Compare: 2004 No 35 ss FC 9, FC 10 FA 13 Agreements recharacterised as sale with ﬁnance provided (1) (2) Value to seller For a seller under a hire purchase agreement, the amount of the loan is determined under section EW 32 (Consideration for agreement for sale and purchase of property or services, hire purchase agreement, speciﬁed option, or ﬁnance lease).
Value to buyer For a buyer under a hire purchase agreement, the amount to the buyer is determined under sections EW 32 and EW 33 1227 Part F s FA 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (which relate to the value of consideration under the ﬁnancial arrangements rules).
Deﬁned in this Act: amount, hire purchase agreement, loan Compare: 2004 No 35 ss FC 10(1)(a), OB 1 consideration, lessee’s acquisition cost, lessor’s disposition value FA 14 Deductibility of expenditure or loss under hire purchase agreement (1) (2) (3) (4) Buyer treated as owner The buyer in section FA 12 is treated as the owner of the prop- erty for the purposes of subpart EE (Depreciation).
Seller not treated as owner The seller in section FA 12 is not treated as the owner of the property for the purposes of subpart EE.

Discounted or bad debts Subsection (4) applies if the seller takes an amount calculated under section FA 15 into account as the cost of trading stock or in the calculation of their net income for an income year.
No deduction for seller The seller is denied a deduction under section DB 14 or DB 31 (which relate to debts sold at a discount and bad debts) for an amount owing under the hire purchase agreement.
Deﬁned in this Act: amount, deduction, hire purchase agreement, income year, net income, trading stock Compare: 2004 No 35 s FC 10(1)(c), (5)(c) FA 15 Treatment when agreement ends: seller acquiring property When this section applies This section applies, subject to sections FA 16 and FA 17, when— (a) a hire purchase agreement described in section FA 12 ends by the date on which its term ends or after that date; and the buyer does not acquire ownership of the property; and a person associated with the buyer does not acquire ownership of the property.
(b) (c) (1) 1228 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FA 15 (2) (3) (4) Sale of property The seller is treated as buying the property from the buyer for an amount equal to the outstanding balance calculated under subsection (3), and the buyer is treated as selling the property to the seller for that amount.

The date of the sale is the date the agreement ends.
Outstanding balance The outstanding balance is the amount calculated using the formula— net balance due on termination − buyer’s termination payment + seller’s termination payment.
Deﬁnition of items in formula In the formula,— (a) (b) (c) net balance due on termination is the net balance due under the hire purchase agreement on the date the agreement ends less any costs and expenses referred to in section 31(2)(c) and (d) of the Credit (Repossession) Act 1997: buyer’s termination payment is the sum of the fol- lowing amounts, as applicable: (i) an amount paid by the buyer, or an associated per- son, to the seller, or an associated person, under the agreement; and an amount paid as a consequence of the ending of the agreement; and an amount required to be taken into account by the buyer under the base price adjustment in sec- tion EW 31 (Base price adjustment formula) or in item “a” of the formula in section EZ 38(1) (In- come and expenditure where ﬁnancial arrange- ment redeemed or disposed of): (ii) (iii) seller’s termination payment is the sum of the follow- ing amounts, as applicable: (i) an amount paid by the seller, or an associated per- son, to the buyer, or an associated person, under the agreement; and an amount paid as a consequence of the ending of the agreement; and (ii) 1229 Part F s FA 16 Income Tax Act 2007 Reprinted as at 1 January 2010 (iii) an amount required to be taken into account by the buyer under the base price adjustment in sec- tion EW 31 or by the seller in item “b” or “c” of the formula in section EZ 38(1) or (2).
(5) Base price adjustment For the purposes of section EW 31, the outstanding balance is taken into account as the consideration paid by the buyer to the seller under the hire purchase agreement.
Deﬁned in this Act: amount, associated person, hire purchase agreement, out- standing balance Compare: 2004 No 35 ss FC 10(2), (5)(a), OB 1 lessee’s outstanding balance, lessor’s outstanding balance, net balance due FA 16 Treatment when agreement ends: when seller is cash basis person When this section applies This section applies for the purposes of section FA 15 when the seller is a cash basis person.
Reduction The amount treated as the seller’s purchase price in section FA 15(2) is reduced by an amount for accrued but unpaid interest on the hire purchase agreement calculated using the formula— accrual income − income.
Deﬁnition of items in formula In the formula,— (a) accrual income is the amount of income that would have been derived under 1 of the spreading methods for payments under the hire purchase agreement if— the seller were not a cash basis person; and (i) section EW 31 (Base price adjustment formula) (ii) did not apply to the seller and the agreement in the income year when the agreement ends: income is the amount of the seller’s income from pay- ments received under the hire purchase agreement.
Deﬁned in this Act: amount, cash basis person, hire purchase agreement, in- come, income year, interest, pay, spreading method Compare: 2004 No 35 s FC 10(3) (b) (1) (2) (3) 1230 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FA 18 FA 17 Treatment when agreement ends: when buyer is cash basis person (1) (2) (3) When this section applies This section applies for the purposes of section FA 15 when the buyer is a cash basis person.
Reduction The amount treated as the buyer’s sale price in section FA 15(2) is reduced by an amount for accrued but unpaid interest on the hire purchase agreement calculated using the formula— prepaid expenditure − expenditure.
Deﬁnition of items in formula In the formula,— (a) prepaid expenditure is the amount of prepaid ex- penditure that would have been incurred under 1 of the spreading methods for payments under the hire purchase agreement if— (i) (ii) the buyer were not a cash basis person; and section EW 31 (Base price adjustment formula) did not apply to the buyer and the agreement in the income year when the agreement ends: expenditure is the amount of expenditure incurred by the buyer and treated as interest under the hire purchase agreement.
(b) Deﬁned in this Act: amount, cash basis person, hire purchase agreement, in- come year, interest, pay, prepaid expenditure, spreading method Compare: 2004 No 35 s FC 10(4) FA 18 Treatment of amounts paid in income years after agreement ends (1) (2) When this section applies This section applies when an amount that is liable to be paid under a hire purchase agreement is paid in an income year that is later than the income year in which the agreement ends.
Liability under agreement If the buyer is liable to pay the amount under the terms of the agreement to the seller, the amount is income of the seller under section CC 13(2) (Amounts paid in income years after hire purchase agreement ends).
1231 Part F s FB 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) Payment after end of agreement If the seller pays the amount to the buyer under the agreement and, consequent on the ending of the agreement, the amount was not taken into account, the amount is treated as— (a) expenditure incurred by the seller in the income year in which the amount is paid; and income of the buyer under section CC 13(3), if they have been allowed a deduction in relation to the prop- erty under the agreement in the income year in which the amount is paid.
(b) Associated persons In this section, the seller or the buyer includes a person asso- ciated with them.

Deﬁned in this Act: amount, associated person, deduction, hire purchase agree- ment, income, income year, pay Compare: 2004 No 35 s FC 10(5)(d)–(f) Subpart FB—Transfers of relationship property FB 1 What this subpart does When this subpart applies This subpart sets out the tax treatment when property is trans- ferred on a settlement of relationship property.
General treatment of parties to agreement The tax consequences for the transferee on a settlement of re- lationship property are the same as if the transferor had con- tinued to hold the property.

Meaning of settlement of relationship property A settlement of relationship property means a transaction between parties to a relationship agreement that creates a dis- posal and acquisition of property under this subpart.
Deﬁned in this Act: relationship agreement, settlement of relationship property, tax (1) (2) (3) 1232 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FB 3 FB 2 Personal property (1) (2) (3) When this section applies This section applies for the purposes of sections CB 4 (Per- sonal property acquired for purpose of disposal) and CB 5 (Business of dealing in personal property) when personal property, or an interest in personal property, is transferred on a settlement of relationship property.
Transfer at cost The transfer is treated as a disposal and acquisition of the prop- erty for an amount that equals the cost of the property or, as applicable, the interest in the property, to the transferor.

Further disposal treated as dealing If, after the transfer, the transferee disposes of the property, they are treated in relation to the disposal as carrying on a business of dealing in the property.
Deﬁned in this Act: amount, business, settlement of relationship property Compare: 2004 No 35 s FF 4 FB 3 Land acquired for certain purposes or under certain conditions (1) (2) (3) When this section applies This section applies for the purposes of sections CB 6 to CB 12, CB 14, CB 17, CB 20, and CB 23 (which relate to the dis- posal of land) and Part D (Deductions) when land was acquired for a purpose set out in or under the conditions set out in any of those sections, and the land is transferred on a settlement of relationship property.
Transfer at cost The transfer is treated as a disposal and acquisition for an amount that equals the total cost of the land to the transferor at the date of transfer.

Date of acquisition The transferee is treated as having acquired the land on the date it was acquired by the transferor.

1233 Part F s FB 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Further disposal For the tax consequences if the transferee disposes of the land, see section FB 5.
Deﬁned in this Act: amount, date of transfer, dispose, land, settlement of rela- tionship property, tax Compare: 2004 No 35 s FF 6(1)(a) FB 4 Land under scheme for major development or division When this section applies This section applies for the purposes of section CB 13 (Dis- posal: amount from major development or division and not already in income) and Part D (Deductions) when land is trans- ferred on a settlement of relationship property.
Transfer at market value plus expenditure If the transferor has already begun an undertaking or scheme of the kind referred to in section CB 13, the transfer is treated as a disposal by them for an amount that equals the sum of— the market value of the land on the date on which they (a) began the undertaking or scheme: the expenditure that they have incurred in carrying on the undertaking or scheme before the date of transfer.
(b) Expenditure incurred by transferee For the purposes of subsection (2), the transferee is treated as having incurred expenditure in— (a) acquiring the land of an amount equal to the market value referred to in subsection (2)(a); and carrying on the undertaking or scheme of an amount equal to the expenditure in subsection (2)(b).
(b) When scheme not begun at date of transfer If no undertaking or scheme as described in subsection (2) has begun at the date of transfer, the transferee is treated as having acquired the land for an amount that equals the total cost of the land to the transferor at the date of transfer.

(1) (2) (3) (4) 1234 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FB 6 (5) Further disposal For the tax consequences if the transferee disposes of the land, seesection FB 5.
Deﬁned in this Act: amount, date of transfer, dispose, land, market value, settle- ment of relationship property, tax Compare: 2004 No 35 s FF 6(1)(b) FB 5 Disposal of land (1) (2) (3) When this section applies This section applies for the purposes of sections FB 3 and FB 4 when the transferor and the transferee are not associated per- sons.
Persons treated as associated If the transferee disposes of the land, section CB 15 (Transac- tions between associated persons) applies as if the transferor and the transferee were associated persons.

Land disposed of by mortgagee If a mortgagee disposes of land because the transferee defaults under the mortgage, the disposal is treated as a disposal of land.
Deﬁned in this Act: associated person, dispose, land, mortgage Compare: 2004 No 35 s FF 6(1)(a)(iv), (b)(iv), (2) FB 6 Timber or right to take timber (1) (2) When this section applies This section applies for the purposes of section CB 24 (Dis- posal of timber or right to take timber) when timber, or a right to take timber, is transferred on a settlement of relationship property.
Transfer at cost of timber at date of transfer The transfer is treated as if— (a) (b) it were a disposal and acquisition for consideration; and the amount of consideration were equal to the total cost of timber, or the right to take timber, to the transferor at the date of transfer.
Deﬁned in this Act: amount, cost of timber, date of transfer, right to take timber, settlement of relationship property, timber Compare: 2004 No 35 s FF 7(1), (2) 1235 Part F s FB 7 Income Tax Act 2007 Reprinted as at 1 January 2010 FB 7 Land with standing timber (1) (2) When this section applies This section applies for the purposes of section CB 25 (Dis- posal of land with standing timber) when— (a) land with standing timber on it is transferred on a settle- ment of relationship property; and the standing timber does not consist of ornamental or in- cidental trees, as evidenced by a certiﬁcate given under section 44C of the Tax Administration Act 1994.
(b) Transfer at cost of timber at date of transfer The transfer is treated as if— (a) (b) it were a disposal and acquisition for consideration; and the amount of consideration were equal to the total cost of timber to the transferor at the date of transfer.
Deﬁned in this Act: amount, cost of timber, date of transfer, land, settlement of relationship property, standing timber, timber Compare: 2004 No 35 s FF 7(3), (4) FB 8 Patent applications and patent rights When this section applies This section applies for the purposes of sections CB 30 and DB 38 to DB 40 (which relate to patent applications and patent rights) when a patent application with complete speciﬁcations or a patent right is transferred on a settlement of relationship property.
Transfer: part of expenditure or cost of rights The transfer is treated as a disposal and acquisition for an amount that equals, as applicable,— (a) expenditure referred to in section DB 38 (Patent rights: devising patented inventions) for which the transferor is denied a deduction; or the cost of the applications or rights referred to in sec- tion DB 39 (Patent rights acquired before 1 April 1993) for which the transferor is denied a deduction.
Deﬁned in this Act: amount, deduction, patent rights, settlement of relationship property Compare: 2004 No 35 s FF 8 (b) (1) (2) 1236 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FB 11 FB 9 Financial arrangements rules The ﬁnancial arrangements rules do not apply to a ﬁnancial arrangement transferred on a settlement of relationship prop- erty if the ﬁnancial arrangement meets the criteria set out in section EW 10(6) (Financial arrangements to which ﬁnancial arrangements rules apply).
For the application of the old ﬁ- nancial arrangements rules, see section EZ 45(c) (Application of old ﬁnancial arrangements rules).

Deﬁned in this Act: ﬁnancial arrangement, ﬁnancial arrangements rules, old ﬁnancial arrangement rules, settlement of relationship property Compare: 2004 No 35 s FF 2 Section FB 9: amended (with effect on 1 April 2008), on 6 October 2009, by section 203(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
FB 10 Continuity provisions: shares and options (1) (2) When this section applies This section applies to modify sections YC 2 to YC 6 (which relate to voting interests and market value interests) for the purposes of the application of the continuity provisions when a share, or option over a share, is transferred on a settlement of relationship property.
Transferee treated as holding share or option The transferee is treated as having acquired the share or option on the date it was acquired by the transferor, and to have held it at all times up to the date of transfer.
Deﬁned in this Act: continuity provisions, date of transfer, option, settlement of relationship property, share Compare: 2004 No 35 s FF 1 FB 11 Pension payments to former employees (1) When this section applies This section applies for the purposes of section DC 2 (Pension payments to former employees) when a person is entitled to the payment of a pension from a former employer, and because of a settlement of relationship property, the employer pays some or all of the amount of the pension to another person.
1237 Part F s FB 12 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Deduction for employer Section DC 2(1) and (2) applies to the amount paid as if it were the payment of a pension to the former employee.
Deﬁned in this Act: amount, deduction, employee, employer, pay, settlement of relationship property Compare: 2004 No 35 s FF 17(1) FB 12 Pension payments to former partners (1) (2) When this section applies This section applies for the purposes of section DC 3 (Pension payments to former partners) when a person is entitled to the payment of a pension from a partner in a partnership or from any person, and because of a settlement of relationship prop- erty, the partnership, partner, or person pays some or all of the amount of the pension to another person.
Deduction for partner Section DC 3 applies to the amount paid as if it were the payment of a pension to the former partner.

Deﬁned in this Act: amount, deduction, pay, settlement of relationship property Compare: 2004 No 35 s FF 17(2), (3) FB 13 Trading stock (1) (2) When this section applies This section applies for the purposes of subpart EB (Valuation of trading stock (including dealer’s livestock)) when trading stock is transferred on a settlement of relationship property.
When transferor holds and uses trading stock in business If the transferor used trading stock in carrying on a business and held the trading stock at the start of the year of transfer, the transfer is treated as a disposal by the transferor and an acquisition by the transferee for an amount equal to the greater of— (a) the value of the trading stock under section EB 3 (Valu- ation of trading stock) for the transferor at the end of the income year before the year of transfer; or the value of the trading stock under section EB 3 for the transferee at the end of the year of transfer.
(b) 1238 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FB 14 (3) (4) (5) (6) (7) When transferor acquires and uses trading stock in business If the transferor used the trading stock in carrying on a busi- ness and acquired the trading stock during the year of transfer, the transfer is treated as a disposal by the transferor and an ac- quisition by the transferee for an amount equal to the cost of the trading stock to the transferor.
When transferor has not used trading stock in business If the transferor did not use the trading stock in the carrying on of a business, the transfer is treated as a disposal by the trans- feror and acquisition by the transferee for an amount equal to the cost of the trading stock to the transferor.
When transferee disposes of trading stock If, after a transfer under subsection (2) or (3), the trading stock was not used by the transferee in the carrying on of a business and they dispose of the trading stock at any time, the disposal is treated as a disposal of trading stock used by the transferee in the carrying on of a business.
Speciﬁed livestock in dealing operation For the purposes of subsection (2), trading stock does not in- clude speciﬁed livestock unless it is used in a dealing operation and sections FB 14 and FB 17 apply.

Relationship with sections GC 1 and GC 2 This section overrides sections GC 1 and GC 2 (which relate to the disposal of trading stock for inadequate consideration).
Deﬁned in this Act: amount, business, consideration, income year, settlement of relationship property, speciﬁed livestock, trading stock, year of transfer Compare: 2004 No 35 s FF 13 FB 14 Speciﬁed livestock (1) When this section applies This section applies for the purposes of sections EC 6 to EC 26 (which relate to the valuation of speciﬁed livestock) when— speciﬁed livestock is transferred on a settlement of re- (a) lationship property; and the transferor used the livestock in the carrying on of a business other than a business of dealing in livestock, and held the livestock at the start of the year of transfer; and (b) 1239 Part F s FB 15 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (c) the value of the livestock is not determined under the herd scheme, seesection FB 15.
Transfer at amount determined under subparts EA and EC The transfer is treated as a disposal and acquisition for an amount equal to the value that the transferor determined under subpart EC (Valuation of livestock) and took into account in section EA 1 (Trading stock, livestock, and excepted ﬁnancial arrangements) at the end of the income year before the year of transfer.
Relationship with section GC 1 and GC 2 This section overrides sections GC 1 and GC 2 (which relate to the disposal of trading stock for inadequate consideration).
Deﬁned in this Act: amount, business, herd scheme, income year, settlement of relationship property, speciﬁed livestock, year of transfer Compare: 2004 No 35 s FF 13(1)(a)(i), (3) FB 15 Speciﬁed livestock valued under herd scheme When this section applies This section applies for the purposes of sections EC 8 to EC 26 (which relate to the valuation of speciﬁed livestock) when— speciﬁed livestock is transferred on a settlement of re- (a) lationship property and the transferor— (i) used the livestock in the carrying on of a busi- ness; and held the livestock at the start of the year of trans- fer; and (ii) (b) the value of the livestock is determined under the herd scheme— (i) by the transferor at the end of the income year before the year of transfer; and by the transferee at the end of the year of transfer.
(ii) Transfer at national average market value The transfer is treated as a disposal and acquisition for an amount equal to the national average market value of the live- stock for the year of transfer.
If the transferor adopted a herd value ratio, the amount is equal to the national average market value of the livestock for the year of transfer multiplied by the (1) (2) 1240 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FB 16 herd value ratio applying in the income year before the year of transfer.
Deﬁned in this Act: amount, business, herd scheme, herd value ratio, income year, market value, national average market value, settlement of relationship property, speciﬁed livestock, year of transfer Compare: 2004 No 35 s FF 9 FB 16 Non-speciﬁed livestock (1) (2) (3) (4) (5) When subsections (2) to (4) apply Subsections (2) to (4) apply for the purposes of section EC 31 (Enhanced production) in an income year when— (a) non-speciﬁed livestock is transferred on a settlement of relationship property; and because of the transfer, the transferee starts to derive, or once again derives, income from non-speciﬁed live- stock.
(b) Transferee not starting to derive income The transferee is treated as not starting to derive, or once again deriving income from non-speciﬁed livestock.

However, the transfer is taken into account in working out whether any later acquisition by the transferee of non-speciﬁed livestock means that they start to derive, or once again derive, income from non-speciﬁed livestock.
When subsection (4) applies Subsection (4) applies when the transferee uses the non-speci- ﬁed livestock in deriving income and was not, before the trans- fer, deriving income from non-speciﬁed livestock.

Livestock being written down to standard value If the year of transfer falls in the ﬁrst or second year of the 3-year period referred to in section EC 31(1)(b), the transferee must apply section EC 31(2) as if they were the transferor and the transfer had not taken place.
Transferee not acquiring land for production For the purposes of section EC 31(1)(a)(ii) and (iii), if land is transferred on a settlement of relationship property, the trans- 1241 Part F s FB 17 Income Tax Act 2007 Reprinted as at 1 January 2010 feree is treated as having acquired the land on the date it was acquired by the transferor.
Deﬁned in this Act: income, income year, land, non-speciﬁed livestock, settle- ment of relationship property, standard value, year of transfer Compare: 2004 No 35 s FF 10 FB 17 High-priced livestock When this section applies This section applies for the purposes of sections EC 32 to EC 37 (which relate to the valuation of high-priced livestock) when high-priced livestock is transferred on a settlement of re- lationship property.
Transfer at cost The transfer is treated as a disposal and acquisition for an amount equal to the cost of the livestock to the transferor.

The transferee is treated as having acquired the livestock on the day it was acquired by the transferor.
Straight-line method of valuation In determining the value of the livestock at the end of the year of transfer, the transferee must take into account the amount referred to in subsection (2) reduced by the depreciation per- centage of its cost price under section EC 34(2) (General rule).

Subsection (4) overrides this subsection.


When diminishing value chosen If the transferor had chosen to apply the diminishing value method to the valuation of the livestock, the transferee is treated as also having made that choice, and the reduction is calculated under section EC 34(3).
But if the transferor had not chosen to apply the diminishing value method, the transferee may make a choice between the methods set out in section EC 34(2) and (3) only if the livestock was acquired by the transferor in the year of transfer.
Deﬁned in this Act: amount, cost price, depreciation percentage, diminish- ing value method, high-priced livestock, settlement of relationship property, straight-line method, year of transfer Compare: 2004 No 35 s FF 11 (1) (2) (3) (4) 1242 Reprinted as at 1 January 2010 FB 18 Bloodstock Income Tax Act 2007 Part F s FB 19 (1) (2) When this section applies This section applies for the purposes of section EC 41 (Re- duction: bloodstock not previously used for breeding in New Zealand) when bloodstock is transferred on a settlement of re- lationship property.
Use for breeding purposes in New Zealand If the bloodstock has been used for breeding purposes in New Zealand by the transferor, then for valuation purposes by the transferee and the amount of reduction applying to the value of an animal, the bloodstock is treated as not having been used for breeding purposes in New Zealand by the transferor.
Deﬁned in this Act: amount, bloodstock, New Zealand, settlement of relation- ship property Compare: 2004 No 35 s FF 12 FB 19 Leased assets (1) (2) When this section applies This section applies when— (a) a person leases, rents, or hires plant, machinery, or other equipment, including a motor vehicle or a temporary building; and they are allowed a deduction in an income year for an amount paid under the agreement to lease, rent, or hire; and they acquire the lease asset at any time, or a person associated with them acquires the asset; and either they, or the associated person, transfer the asset on a settlement of relationship property.
(b) (c) (d) Income when transferee disposes of asset If the transferee disposes of the asset for an amount that is more than the transfer amount, they are treated as deriving income as described in section FA 5 (Assets acquired and disposed of after deduction of payments under lease) in the income year of the disposal of the asset equal to the lesser of— (a) the amount by which the amount derived on disposal is more than the transfer amount; or 1243 Part F s FB 20 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the sum of the amounts for which the transferor has been allowed a deduction.
(3) Transfer amount In this section, the transfer amount is the amount that equals, as applicable,— (a) the adjusted tax value of the asset at the start of the year of transfer; or if the asset was acquired by the transferor or the asso- ciated person during the year of transfer, the base value of the asset.
(b) Deﬁned in this Act: adjusted tax value, amount, associated person, deduction, income, income year, lease, pay, settlement of relationship property, temporary building, transfer amount, year of transfer Compare: 2004 No 35 s FF 14 FB 20 Mining assets When this section applies This section applies when a resident mining operator transfers on a settlement of relationship property an asset that they used immediately before the transfer in deriving assessable income from mining.
(b) (c) Transfer at cost, reduced value, or reduced expenditure The transfer is treated as a disposal and acquisition for an amount equal to the least of— (a) the amount of expenditure incurred by the transferor in acquiring the asset: when the transferor has been allowed a deduction for an amount of depreciation loss in relation to the asset, the adjusted tax value at the start of the year of transfer: when the asset has been acquired as a result of min- ing exploration expenditure or mining development ex- penditure incurred by the transferor for which they have been allowed a deduction under sections DU 1 and DU 9(1) (which relate to mineral mining expenditure), the amount of expenditure not allowed as a deduction under those provisions.
(1) (2) 1244 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FB 20 (3) (4) (5) (6) (7) Transferee’s expenditure The transferee is treated as having incurred expenditure in ac- quiring the asset equal to the amount determined under sub- section (2).
When transferee not a resident mining operator Subsections (5) and (6) apply when— (a) the transferor is treated as having disposed of the asset for an amount determined under subsection (2)(c); and the transferee is not a resident mining operator at and after the date of transfer.
(b) Treatment of disposal and transferee If the transferee disposes of the asset, they are treated as a resident mining operator in relation to the disposal, and the disposal is treated as a sale to which sections CU 3, CU 12(1), DU 2, and DU 9(1) (which relate to mining) apply.
Consideration for disposal For the purposes of subsection (5), and sections CU 1 to CU 11, DU 1 to DU 8, IA 7(7), IS 1 to IS 4, and IS 6 (which relate to mining and mining companies’ tax losses), the consideration for the disposal is the amount by which the amount derived on the disposal under subsection (5) is more than the amount determined under subsection (2)(c).
When transferee is resident mining operator If the transferee is, at and after the date of transfer, a resident mining operator, and the transferor is treated as having dis- posed of the asset for an amount determined under subsection (2)(c), then for the purposes of sections CU 3, CU 10, DU 2, and DU 6, the transferee is treated as having acquired the asset as a result of mining exploration expenditure or mining devel- opment expenditure incurred by the transferee.
Deﬁned in this Act: adjusted tax value, amount, assessable income, date of transfer, deduction, depreciation loss, income from mining, mining develop- ment expenditure, mining exploration expenditure, resident mining operator, settlement of relationship property, year of transfer Compare: 2004 No 35 s FF 19 1245 Part F s FB 21 Income Tax Act 2007 Reprinted as at 1 January 2010 FB 21 Depreciable property When this section applies This section applies when a person who is allowed a deduc- tion for an amount of depreciation loss for an item of property transfers the item on a settlement of relationship property.
Persons to whom section does not apply This section does not apply if the person is a resident mining operator to whom section FB 20 applies.

Transfer at cost or adjusted tax value The transfer is treated as a disposal and acquisition for an amount equal to, as applicable,— (a) if the transferor acquired the item in the year of transfer, the cost of the item to them; or in any other case, the adjusted tax value of the item measured at the start of the year of transfer.
(b) Treatment of transferee In relation to amounts of depreciation loss for the item, the transferee— (a) has an amount of depreciation loss for the item from the date of transfer, whether or not the transferor has in fact had an amount of depreciation loss: is treated as having had an amount of depreciation loss equal to all amounts of depreciation loss that the trans- feror had for the item in income years before the year of transfer: does not have a greater amount of depreciation loss than that which the transferor would have had if they had kept the item.
(b) (c) When item is building If the item is a building, the transferee’s amount of depreci- ation loss must be determined having regard to the original cost of the building to the transferor.

Activities in year of transfer If the item has been acquired, erected, installed, altered, ex- tended, improved, or attached by the transferor in the year of transfer, the item is treated as if it were acquired, erected, in- stalled, altered, extended, improved, or attached by the trans- feree in the income year.
(1) (2) (3) (4) (5) (6) 1246 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FC 1 (7) Conditions applying to item For the purposes of determining the rate that applies to the item under section EE 31(2)(b) or EZ 23(4) (which relate to depreciation rates for new assets), if either of the following conditions applied to the item when the transferor acquired or erected it, the condition is treated as applying to the item at the date of transfer: (a) the item had not previously been used by a person, or acquired or held by a person for their use; and if the item is a building or part of a building, it had not previously been occupied.
(b) Deﬁned in this Act: acquire, adjusted tax value, amount, date of transfer, de- duction, depreciable property, depreciation loss, dispose, income year, resident mining operator, settlement of relationship property, year of transfer Compare: 2004 No 35 ss FF 15, FF 16 Subpart FC—Distribution, transmission, and gifts of property Introductory provisions FC 1 What this subpart does (1) Types of distributions and gifts This subpart provides a value for property that is disposed of under the following transactions: (a) the transfer of a person’s estate to an executor or admin- istrator on the death of the person: the transfer of property on a distribution by an executor, administrator, or trustee of a deceased person’s estate to a beneﬁciary who is beneﬁcially entitled to receive the property under the will or the rules governing intestacy: the transfer of property on a distribution by a trustee of a trust to a beneﬁciary of the trust: the transfer of property on a distribution in kind by a company in a transfer of value caused by a shareholding in the company under section CD 6 (When is a transfer caused by a shareholding relationship?
): the transfer of property on the making of a gift: (b) (c) (d) (e) 1247 Part F s FC 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (f) the transfer of property on a settlement by the trustee of a trust on the trustee of another trust, if authorised under— (i) a trust instrument as a power of advancement or resettlement: section 41 of the Trustee Act 1956 as the pay- ment of money or the application of property.
(ii) (2) (b) Some deﬁnitions In this subpart,— close relative, in relation to a transfer from a person’s estate, means— (a) a surviving spouse, civil union partner, or de facto part- ner of the deceased person: a person who is within the second degree of relationship to the deceased person tax-base property means— (a) (b) revenue account property: an attributing interest in a foreign investment fund (FIF): a ﬁnancial arrangement other than an arrangement for which the deceased person, or their trustee, was a cash basis person: an item for which a deduction for an amount of depre- ciation loss arises.
(c) (d) Deﬁned in this Act: amount, attributing interest, cash basis person, company, deduction, de facto partner, depreciation loss, FIF, ﬁnancial arrangement, rev- enue account property, settlement, transfer of value, trustee Compare: 2004 No 35 s FI 1 FC 2 Transfer at market value Market value The transfer of property under section FC 1(1) is treated as a disposal by the transferor and an acquisition by the transferee at the market value of the item for the transferor.
The disposal is treated as occurring on the date of the transaction.

Date of transfer of estate of deceased person For property referred to in section FC 1(1)(a), the disposal and acquisition is treated as occurring immediately before the death of the person.

(1) (2) 1248 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FC 4 (3) Exceptions to general rule Sections FC 3 to FC 6 override this subsection.
Deﬁned in this Act: dispose, market value Compare: 2004 No 35 ss FI 2, FI 3 Section FC 2(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 204 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Exceptions for property transferred on death of person FC 3 Property transferred to spouse, civil union partner, or de facto partner (1) (2) When this section applies This section applies in the circumstances described in section FC 1(1)(a) or (b) when property is transferred on a person’s death to the surviving spouse, civil union partner, or de facto partner of the deceased person.
However, this section does not apply if— (a) (b) the property is tax-base property; and a person who is not a close relative of the deceased person is beneﬁcially entitled under the will or intestacy to other property that is tax-base property.
Disposal to spouse or partner The transfer of property to the surviving spouse, civil union partner, or de facto partner of the deceased person, includ- ing any intervening transfer to an executor or administrator, is treated as a transfer of property under a settlement of rela- tionship property under subpart FB (Transfers of relationship property).
Deﬁned in this Act: close relative, de facto partner, settlement of relationship property, tax base property Compare: 2004 No 35 s FI 4 FC 4 Property transferred to charities or to close relatives and others (1) When this section applies This section applies in the circumstances described in section FC 1(1)(b) when tax-base property is transferred on a person’s death when the only beneﬁciaries of the deceased person are— 1249 Part F s FC 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) a close relative of the deceased person: a person exempt under section CW 43 (Charitable be- quests).
Treated as transfer under settlement of relationship property The transfer is treated as a transfer of property on a settlement of relationship property for the purposes of subpart FB (Trans- fers of relationship property) if the following requirements are met: (a) (b) no life interest in the property is created; and no trust over the property is created, other than a trust to execute the will and administer the estate; and while the administration of the estate is continuing, the net income of the estate is distributed to the extent al- lowed— (i) under the will or the rules governing intestacy; and by the trustee’s legal obligations.
Deﬁned in this Act: close relative, net income, settlement of relationship prop- erty, tax-base property, trustee Compare: 2004 No 35 s FI 5 (ii) (c) Section FC 4(1): substituted, on 6 October 2009, by section 205(2) of the Tax- ation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FC 4(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 205(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FC 4(2): amended, on 6 October 2009, by section 205(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FC 4 list of deﬁned terms tax base property: repealed (with effect on 1 April 2008), on 6 October 2009, by section 205(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FC 4 list of deﬁned terms tax-base property: inserted (with effect on 1 April 2008), on 6 October 2009, by section 205(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(2) 1250 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FC 6 FC 5 Land transferred to close relatives (1) (2) (3) What this section applies to This section applies in the circumstances described in section FC 1(1)(a) or (b) when land is transferred on a person’s death to a close relative of the person.
Land Sections CB 9 to CB 11 and CB 14 (which relate to the dis- posal of land) do not apply to the transfer of land, including any intervening transfer to an executor or administrator that, if it had been disposed of by the deceased person, would have resulted in income under any of those sections.
Cost of land If the land is transferred to a person who disposes of it within 10 years of its acquisition by the deceased person, and the person derives income under any of sections CB 9 to CB 11 and CB 14, the cost of land to the person is— (a) (b) the cost of the land incurred by the deceased person; and all other expenditure incurred by both the person and the deceased person that relate to the land for which no deduction has been allowed.
Deﬁned in this Act: close relative, deduction, dispose, income, land, year Compare: 2004 No 35 s FI 7 FC 6 Forestry assets transferred to close relatives (1) (2) What this section applies to This section applies in the circumstances described in section FC 1(1)(a) or (b) when forestry assets are transferred on a per- son’s death to a close relative of the person.
Forestry assets A transfer of a forestry asset, including any intervening trans- fer to an executor or administrator, is treated as a transfer of property on a settlement of relationship property for the pur- poses of subpart FB (Transfers of relationship property).

1251 Part F s FC 7 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Meaning of forestry assets In this section, forestry assets means timber, standing timber, or a right to take timber.
Deﬁned in this Act: close relative, forestry assets, right to take timber, settle- ment of relationship property, standing timber, timber Compare: 2004 No 35 s FI 6 FC 7 Transfer of prepaid property (1) (2) What this section applies to This section applies, in the circumstances described in section FC 1(1)(a) or (b), to a transfer of property on a person’s death for which the deceased person has, in the year of transfer, an unexpired portion of expenditure under section EA 3 (Prepay- ments).
Unexpired prepayments If section EA 3 applies to the property transferred, the property must be valued under section EA 3(4) to (7), as if the date of transfer were the end of an income year.

Deﬁned in this Act: income year, year Compare: 2004 No 35 s FI 8 FC 8 Transfer of certain ﬁnancial arrangements What this section applies to This section applies, in the circumstances described in section FC 1(1)(a) or (b), to a transfer of a ﬁnancial arrangement on a person’s death.
Financial arrangements: cash basis person If the deceased person was a cash basis person and the trustee of the deceased person’s estate is a cash basis person under section EW 60(1) (Trustee of deceased’s estate), the property must be valued at cost.
Deﬁned in this Act: cash basis person, ﬁnancial arrangement, trustee Compare: 2004 No 35 s FI 11 (1) (2) 1252 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 1 Subpart FE—Interest apportionment on thin capitalisation Introductory provisions FE 1 What this subpart does (1) (2) Interest apportionment This subpart applies— (a) to apportion certain interest expenditure between in- come derived from New Zealand and other income for a New Zealand taxpayer who— (i) is controlled by a single non-resident, or is a New Zealand resident (an outbound entity) with an income interest in a CFC, or a New Zealand resi- dent that controls an outbound entity; and has a disproportionately high level of debt fund- ing in relation to their worldwide interest expend- iture; and (ii) (b) to prescribe an acceptable level of equity for a for- eign-owned bank for the application of the interest ap- portionment rules.
Structure of subpart This subpart sets out— (a) the persons to whom the interest apportionment rules may apply: the thresholds for the application of the rules: the consequences of application of the rules: how to calculate the debt percentages of a New Zealand group and a worldwide group: how to calculate a reporting bank’s New Zealand equity threshold, net equity, and funding debt: how to determine the membership of a New Zealand group, a worldwide group, and a New Zealand banking group: how to measure ownership interests in companies for the purposes of this subpart.
(b) (c) (d) (e) (f) (g) Deﬁned in this Act: CFC, control, income, income derived from New Zealand, income interest, interest, New Zealand, New Zealand banking group, non-resi- dent, reporting bank, taxpayer Compare: 2004 No 35 s FG 1 1253 Part F s FE 2 Income Tax Act 2007 Reprinted as at 1 January 2010 Section FE 1(1)(a)(i): substituted (with effect on 30 June 2009), on 6 October 2009, by section 206(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 1 list of deﬁned terms CFC: inserted (with effect on 30 June 2009), on 6 October 2009, by section 206(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 1 list of deﬁned terms income interest: inserted (with effect on 30 June 2009), on 6 October 2009, by section 206(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 2 When this subpart applies (1) Persons to whom interest apportionment rules may apply The interest apportionment rules in sections FE 6 and FE 7 may apply to the following persons if, at a time in an income year, they are: (a) (b) a non-resident who is not a company: a non-resident company unless the company is 1 in which— (i) (ii) a person resident in New Zealand has a direct ownership interest of 50% or more; and no non-resident has a direct ownership interest of 50% or more, when added to any direct owner- ship interests of all persons associated with them: a company that is resident in New Zealand if a non- resident has— (i) an ownership interest in the company of 50% or more: (ii) control of the company by any other means: the trustee of a non-complying trust settled by a non- resident if the value of the settlements made by them, including the value of all settlements made by a person associated with them, are 50% or more of the value of the settlements made on the trust: a company that is resident in New Zealand and has an income interest in a CFC: a company that is resident in New Zealand and has— (i) an ownership interest in a company described in paragraph (e) of 50% or more: control of a company described in paragraph (e) by any other means: (c) (d) (e) (f) (ii) 1254 Reprinted as at 1 January 2010 (g) Income Tax Act 2007 Part F s FE 2 a natural person, or a trustee of a trust settled by a New Zealand resident, if the natural person or trustee is resi- dent in New Zealand and has–– (i) (ii) an income interest in a CFC: an ownership interest in a company described in paragraph (e) or (f) of 50% or more: control of a company described in paragraph (e) or (f) by any other means.
(iii) (2) (3) (4) Ownership interests Ownership interests in a company are determined under sec- tions FE 38 to FE 41.

Treatment of foreign companies For the purposes of this section, a company resident in New Zealand is treated as being a non-resident company if it is treated under a double tax agreement as not being resident in New Zealand.
Associated persons For the purposes of subsection (1)(b)(ii), a non-resident who does not have a direct or an indirect ownership interest in a company and a relative resident in New Zealand are not asso- ciated persons in relation to the company.
Deﬁned in this Act: associated person, CFC, company, control, income interest, income year, interest, New Zealand, non-complying trust, non-resident, non- resident company, relative, resident in New Zealand, settlement, trustee Compare: 2004 No 35 s FG 2(1), (6), (8) Section FE 2(1)(d): amended (with effect on 30 June 2009), on 6 October 2009, by section 207(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 2(1)(e): added (with effect on 30 June 2009), on 6 October 2009, by section 207(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 2(1)(f): added (with effect on 30 June 2009), on 6 October 2009, by section 207(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 2(1)(g): added (with effect on 30 June 2009), on 6 October 2009, by section 207(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 2 list of deﬁned terms CFC: inserted (with effect on 30 June 2009), on 6 October 2009, by section 207(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 2 list of deﬁned terms income interest: inserted (with effect on 30 June 2009), on 6 October 2009, by section 207(2) of the Taxation 1255 Part F s FE 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 3 Interest apportionment for individuals Natural persons and trustees: inbound, not described in section FE 2(1)(g) This subpart applies to a natural person or trustee not described in section FE 2(1)(g) with the following modiﬁcations: (a) the New Zealand group of the natural person or trustee is made up of the natural person or trustee and all asso- ciated persons who–– (i) (ii) are resident in New Zealand; or are carrying on business in New Zealand through a ﬁxed establishment in New Zealand; or derive income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable: (iii) (b) (c) the worldwide group of the trustee is made up of the trustee and–– (i) (ii) the trustee’s New Zealand group; and all non-residents who are associated with the trustee or a member of the trustee’s New Zealand group: in the calculation of the amount of the natural person’s total assets, private and domestic assets are excluded.
Natural persons and trustees: outbound, described in section FE 2(1)(g) This subpart applies to a natural person or trustee described in section FE 2(1)(g) with the following modiﬁcations: (a) the New Zealand group of the natural person or trustee is made up of the natural person or trustee and all asso- ciated persons who are not excess debt outbound com- panies and are not included in a New Zealand group of an excess debt outbound company, and who–– are resident in New Zealand; or (i) are carrying on business in New Zealand through (ii) a ﬁxed establishment in New Zealand; or (1) (2) 1256 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 4 (iii) derive income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable: the worldwide group of the trustee is made up of the trustee and–– (i) (ii) the trustee’s New Zealand group; and all CFCs in which the trustee or a member of the trustee’s New Zealand group has an income interest: in the calculation of the amount of the natural person’s total assets, private and domestic assets are excluded.
(b) (c) Deﬁned in this Act: amount, associated person, business, CFC, double tax agreement, ﬁxed establishment, generally accepted accounting practice, group of companies, income interest, natural person, New Zealand, resident in New Zealand, source in New Zealand, total group assets, total group debt, trustee Section FE 3: substituted (with effect on 30 June 2009), on 6 October 2009, by section 208(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 4 Some deﬁnitions In this subpart,— excess debt entity for an income year is a person who— (a) meets the requirements of section FE 2 in the income (b) (c) year; and is not, at any time in the income year, a reporting bank for a New Zealand banking group, or part of a New Zealand banking group; and is not a natural person other than a person acting as a trustee excess debt outbound company for an income year is an excess debt entity that meets the requirements of section FE 2(1)(e) or (f), and none of the requirements of section FE 2(1)(a) to (d) natural person for an income year is a natural person who— (a) meets the requirements of section FE 2 in the income year; and is a person who is not acting as a trustee (b) reporting bank for a New Zealand banking group is a person who— (a) meets the requirements of section FE 2; and 1257 Part F s FE 5 Income Tax Act 2007 Reprinted as at 1 January 2010 is the person determined under section FE 37.
(b) Deﬁned in this Act: excess debt entity, income year, natural person, New Zealand, New Zealand banking group, reporting bank, trustee Section FE 4 excess debt outbound company: inserted (with effect on 30 June 2009), on 6 October 2009, by section 209(1) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 4 reporting bank: substituted (with effect on 1 April 2008), on 6 October 2009, by section 209(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 4 list of deﬁned terms registered bank: repealed (with effect on 1 April 2008), on 6 October 2009, by section 209(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Interest apportionment rules FE 5 Thresholds for application of interest apportionment rules (1) Threshold for excess debt entity An excess debt entity must apportion its interest expenditure for an income year under section FE 6 if the debt percentage of its New Zealand group for the income year— (a) (b) is more than 75%; and for a company or a trustee, is also more than 110% of the debt percentage of the worldwide group.
Exceptions for excess debt outbound companies (1B) Despite subsection (1), an excess debt outbound company and a natural person or trustee who is described in section FE 2(1)(g) do not have to apportion interest expenditure for an income year under section FE 6 if, for the income year,— the ratio of the total group assets measured under sec- (a) tion FE 16 for its New Zealand group to the total group assets measured under section FE 18 for its worldwide group is 90% or greater: its New Zealand group— (i) (b) has a total amount of deductions for interest al- lowed under sections DB 6 to DB 8 (which re- late to deductions for interest) to the group, less the total deductions allowed in relation to inter- est payable intra-group, that is not greater than $250,000; and does not include an entity with an income interest in a CFC, and the CFC derives rent from land (ii) 1258 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 5 in the country or territory in which the CFC is resident.
Natural persons’ worldwide group total assets (1C) For the purposes of subsection (1B)(a), the total group assets of a natural person’s worldwide group under section FE 18 are measured on the basis that the natural person is an excess debt entity that has a worldwide group made up of–– (a) (b) (c) the natural person; and the natural person’s New Zealand group; and all CFCs in which the natural person or a member of the natural person’s New Zealand group has an income interest.
(2) (3) (4) (5) Threshold for reporting bank A reporting bank must apportion its interest expenditure for an income year under section FE 7 if— (a) the New Zealand net equity of its New Zealand banking group for a tax year is less than its equity threshold; and its group funding debt for the corresponding tax year is more than zero.
(b) Threshold for natural person A natural person must apportion their interest expenditure for an income year under section FE 6 if their New Zealand group debt percentage is more than 75%.

Debt percentages The debt percentage of a New Zealand group is calculated under sections FE 14 to FE 16.

The debt percentage of a world- wide group is calculated under sections FE 17 and FE 18.
Equity threshold, net equity, group funding debt The calculations that a reporting bank must make for the pur- poses of section FE 7 are set out as follows: (a) for the banking group’s equity threshold, see section FE 19: for the banking group’s New Zealand net equity, see section FE 21: for the banking group’s funding debt, see section FE 23.
(c) Deﬁned in this Act: CFC, company, excess debt entity, excess debt outbound company, group funding debt, income interest, income year, interest, natural (b) 1259 Part F s FE 6 Income Tax Act 2007 Reprinted as at 1 January 2010 person, New Zealand, New Zealand banking group, New Zealand net equity, reporting bank, tax year, total group assets, trustee Compare: 2004 No 35 s FG 3 Section FE 5(1B) heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 210(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 5(1B): inserted (with effect on 30 June 2009), on 6 October 2009, by section 210(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 5(1C) heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 210(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 5(1C): inserted (with effect on 30 June 2009), on 6 October 2009, by section 210(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 5 list of deﬁned terms CFC: inserted (with effect on 30 June 2009), on 6 October 2009, by section 210(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 5 list of deﬁned terms excess debt outbound company: inserted (with effect on 30 June 2009), on 6 October 2009, by section 210(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

inserted (with effect Section FE 5 list of deﬁned terms income interest: on 30 June 2009), on 6 October 2009, by section 210(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 5 list of deﬁned terms total group assets: inserted (with effect on 30 June 2009), on 6 October 2009, by section 210(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

FE 6 Apportionment of interest by excess debt entity Who this section applies to This section applies to an excess debt entity or a natural person if section FE 5 requires the entity or person to apportion their interest expenditure for an income year under this section.
A natural person is treated as an excess debt entity for the pur- poses of this section other than in the item threshold amount.
Formula The excess debt entity is treated under section CH 9 (Interest apportionment: excess debt entity) as deriving in the income year an amount of income calculated for the income year using the formula— (1) (2) 1260 Reprinted as at 1 January 2010 Income Tax Act 2007 (total deduction + FRD – adjust) x total debt – concession x total debt Part F s FE 6 group debt percentage – threshold amount group debt percentage.
(3) Items in formula In the formula,— (a) total deduction is the whole amount of the excess debt entity’s deduction for interest allowed under any of sec- tions DB 6 to DB 8 (which relate to deductions for in- terest expenditure) less— (i) the total amount allowed in relation to interest payable to a company that is a member of the entity’s New Zealand group under sections FE 14(2) and FE 28, but this does not include an amount referred to in subparagraph (ii); and the total amount allowed in relation to interest payable under a ﬁnancial arrangement excluded from the total group debt of its New Zealand group under section FE 15: (ii) (ab) FRD is the total amount of dividends paid by the ex- cess debt entity in relation to ﬁxed-rate foreign equity or ﬁxed-rate shares–– (i) (ii) issued by the entity; and held by a person resident in New Zealand who is not a company that is a member of the entity’s New Zealand group: (ac) adjust is— (i) (ii) (iii) zero, if the excess debt entity is not an excess debt outbound company or a natural person or trustee described in section FE 2(1)(g); or the total amount of the items total deduction and FRD (the ﬁnance cost), if the ﬁnance cost is $1,000,000 or less and subparagraph (i) does not apply; or the amount by which $2,000,000 exceeds the ﬁnance cost, if the ﬁnance cost is more than $1,000,000 and less than $2,000,000 and sub- paragraph (i) does not apply; or 1261 Part F s FE 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (iv) zero, if the ﬁnance cost is $2,000,000 or
 more and subparagraph (i) does not apply: (b) (c) (d) (e) total debt is the total amount of the debt of the excess debt entity’s New Zealand group for the income year as calculated under section FE 15, before allowing for a reduction under section FE 13: concession is any reduction allowed under section FE 13 in the total group debt of the excess debt entity’s New Zealand group for the income year, averaged when section FE 8(1)(a) or (b) applies: group debt percentage is the debt percentage of the excess debt
 entity’s New Zealand group for the income year: threshold amount is, as applicable,— (i) if the excess debt entity is a company or trustee, the greater of 75% and 110% of the debt percent- age of their worldwide group: if the person is a natural person who is not a trustee, 75%.
(ii) Deﬁned in this Act: amount, company, deduction, excess debt entity, ﬁnancial arrangement, ﬁxed-rate foreign equity, ﬁxed-rate share, income, income year, interest, natural person, New Zealand, pay, total group debt, trustee Compare: 2004 No 35 s FG 8 Section FE 6(1) heading: substituted (with effect on 30 June 2009), on 6 October 2009, by section 211(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 6(1): substituted (with effect on 30 June 2009), on 6 October 2009, by section 211(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 6(2) formula: amended (with effect on 30 June 2009), on 6 October 2009, by section 211(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 6(3)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 211(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 6(3)(ab): inserted (with effect on 30 June 2009), on 6 October 2009, by section 211(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 6(3)(ac): inserted (with effect on 30 June 2009), on 6 October 2009, by section 211(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 6 list of deﬁned terms ﬁxed-rate foreign equity: inserted (with effect on 30 June 2009), on 6 October 2009, by section 211(5) of the Taxation 1262 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 7 (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 6 list of deﬁned terms ﬁxed-rate share: inserted (with effect on 30 June 2009), on 6 October 2009, by section 211(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 7 Apportionment of interest by reporting bank (1) (2) (3) When this section applies This section applies to a reporting bank if, at the relevant meas- urement date referred to in section FE 8(3),— (a) the New Zealand net equity of its New Zealand banking group for an income year is less than its equity threshold under section FE 19; and its group funding debt for the corresponding tax year is more than zero.
(b) Income The reporting bank is treated as deriving an amount of income under section CH 10 (Interest apportionment: reporting bank) calculated using the formula— Deﬁnition of items in formula In the formula,— (a) (b) amount below threshold is the amount by which the New Zealand net equity for the New Zealand banking group is less than the equity threshold under section FE 19: interest expenditure is the ﬁnancial value for the New Zealand banking group of interest expenditure measured under generally accepted accounting practice that is incurred— (i) by a member of the New Zealand banking group in the income year; and other than in relation to a share that contributes to the item total interest in the formula in sec- tion FE 23, or is a deduction referred to in the deﬁnition of the item interest deductions in that section: (ii) 1263 Part F s FE 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) (c) (d) (e) days in period is the number of days in the relevant measurement period: group funding debt is the group funding debt for the New Zealand banking group for the corresponding tax year: days in year is the number of days in the income year.
Apportionment of income to part-years If an amount of income described in subsection (2) must be apportioned under this Act to a part of an income year, the amount of income for a measurement period is attributed to the part of the income year in which the measurement period falls.
Deﬁned in this Act: amount, deduction, ﬁnancial value, generally accepted ac- counting practice, group funding debt, income, income year, interest, meas- urement period, New Zealand, New Zealand banking group, New Zealand net equity, reporting bank, share, tax year Compare: 2004 No 35 s FG 8B FE 8 Measurement dates Daily, 3-monthly, or annual basis for excess debt entity An excess debt entity must measure the amount of total group debt and total group assets of its New Zealand group for an income year using 1 of the following methods: (a) the average amount at the end of each day of the income year; or the average amount at the end of each 3-month period in the income year; or the amount at the end of the income year.
(b) (c) Different balance dates For the purposes of subsection (1), if the members of the en- tity’s New Zealand group do not have the same balance date, the alternatives in subsection (1) apply as if the entity has the same balance date as that of the New Zealand parent.
Daily, monthly, or quarterly for reporting bank A reporting bank must measure both the equity threshold and the net equity of its New Zealand banking group for an income year on 1 of the following dates: (a) each day of the income year; or (1) (2) (3) 1264 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 10 (4) (b) (c) the last day of each calendar month of the income year; or if the reporting bank does not choose either paragraph (a) or (b), the last day of each quarter of an income year.
Change in identity of reporting bank If the identity of the reporting bank changes, the ﬁrst measure- ment date for the new reporting bank is the day after the last measurement date of the former reporting bank.
Deﬁned in this Act: amount, excess debt entity, income year, New Zealand, New Zealand banking group, quarter, reporting bank, total group assets, total group debt Compare: 2004 No 35 ss FG 4(5), (6), FG 8E FE 9 Elections (1) (2) (3) Return of income An election or choice under this subpart is made by providing a return of income for the relevant income year.
Measurement date A choice of measurement date under section FE 8 may be changed after a notice of assessment for an income year is re- ceived from the Commissioner.

Control threshold, enlarged New Zealand group A choice of control threshold under section FE 27, or an election to include certain other companies in a New Zealand group under section FE 30 by a person other than an excess debt entity is made by providing notice to the Commissioner with the return of income for the relevant income year.
Deﬁned in this Act: assessment, Commissioner, company, control, excess debt entity, income year, New Zealand, notice, return of income Compare: 2004 No 35 s FG 10 FE 10 Currency (1) Calculations In this subpart, the following values must be calculated in New Zealand currency: (a) an amount of total group debt and an amount of total group assets of a New Zealand group or of a worldwide group: 1265 Part F s FE 11 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) a ﬁnancial arrangement or risk-weighted exposure.
(2) (3) Currency conversions for excess debt entity If the value referred to in subsection (1) is denominated in a foreign currency, an excess debt entity must convert the value to New Zealand currency at— (a) the close of trading spot exchange rate for the foreign currency on the relevant measurement date under sec- tion FE 8; or the forward exchange rate that applies on the ﬁrst day of the income year for the relevant measurement date under section FE 8.
(b) Currency conversions for reporting bank If the value referred to in subsection (1) is denominated in a foreign currency, a reporting bank must convert the value to New Zealand currency at the close of trading spot exchange rate for the foreign currency on the relevant measurement date under section FE 8.
Deﬁned in this Act: amount, close of trading spot exchange rate, excess debt entity, ﬁnancial arrangement, income year, New Zealand, reporting bank, total group assets, total group debt Compare: 2004 No 35 ss FG 4(7), FG 5(6), FG 7, FG 8I FE 11 Temporary increases or decreases in value A temporary increase or decrease in a value applying in this subpart must be excluded from a calculation made under this subpart if— (a) the increase or decrease has, or would have, a purpose or effect of defeating the intent and application of this subpart; or the change is produced by an arrangement that has an effect of defeating the intent and application of this sub- part.
(b) Deﬁned in this Act: arrangement Compare: 2004 No 35 ss FG 4(8), FG 5(7), FG 8J 1266 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 12 FE 12 Calculation of debt percentages Calculations (1) (2) (3) (4) (5) Requirement for New Zealand group An excess debt entity must calculate the debt percentage of its New Zealand group under the rules set out in sections FE 14 to FE 16.

A natural person must calculate their debt percentage under the rules set out in sections FE 13 to FE 16 and FE 18.
Requirement for worldwide group If the debt percentage of the New Zealand group is more than 75% as described in section FE 5(1)(a), the entity must cal- culate the debt percentage of their worldwide group under the rules set out in sections FE 17 and FE 18.

Debt percentage of group A debt percentage of a group is found by dividing the amount of total group debt by the amount of total group assets of the group for an income year or accounting year, as applicable.
The amounts are calculated on a consolidated basis.

Total group debt and total group assets for an income year or ac- counting year are deﬁned in— (a) sections FE 15 and FE 16 for a New Zealand group; and section FE 18 for a worldwide group.

(b) Membership of company’s New Zealand group For an excess debt entity that is a company, the New Zealand group is made up of all companies, traced tier by tier, that are identiﬁed as within the control threshold of the New Zealand parent, seesection FE 27.
Section FE 25 provides the process for determining who is a member of a group based on the iden- tiﬁcation of a New Zealand parent and the establishment of the control threshold.
Membership of company’s worldwide group For an excess debt entity that is a company, the worldwide group is made up of all companies included as members of the worldwide group under–– (a) sections FE 31 and FE 32, for an excess debt entity that is not an excess debt outbound company: sections FE 31B to FE 32, for an excess debt outbound company.
(b) 1267 Part F s FE 12 Income Tax Act 2007 Reprinted as at 1 January 2010 Natural persons: membership of New Zealand groups For a natural person, the membership of the New Zealand group is determined as described in section FE 3(1) and (2), as applicable.

Trustees: membership of New Zealand and worldwide groups For a trustee, the memberships of the New Zealand group and the worldwide group are determined as described in section FE 3(1) and (2), as applicable.
Deﬁned in this Act: accounting year, amount, company, control, excess debt en- tity, excess debt outbound company, income year, natural person, New Zealand, non-resident, total group assets, total group debt, trustee, ultimate parent Compare: 2004 No 35 ss FG 3, FG 4(1), FG 5(1) Section FE 12(1): amended (with effect on 30 June 2009), on 6 October 2009, by section 212(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 12(2): amended (with effect on 30 June 2009), on 6 October 2009, by section 212(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 12(5) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 212(3) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 12(5): substituted (with effect on 30 June 2009), on 6 October 2009, by section 212(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 12(6) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 212(4) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 12(6): substituted (with effect on 30 June 2009), on 6 October 2009, by section 212(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 12(7) heading: added (with effect on 30 June 2009), on 6 October 2009, by section 212(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 12(7): added (with effect on 30 June 2009), on 6 October 2009, by section 212(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 12(6) list of deﬁned terms excess debt outbound company: in- serted (with effect on 30 June 2009), on 6 October 2009, by section 212(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(6) (7) 1268 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 13 FE 13 Financial arrangements entered into with persons outside group (1) (2) (3) When this section applies This section applies when a natural person, a member of a natural person’s New Zealand group, an excess debt entity, or a member of an entity’s New Zealand group or worldwide group, enters into a ﬁnancial arrangement with another person (person A) as described in this section and the ﬁnancial ar- rangement— (a) (b) provides funds to person A; and would otherwise be included in the calculation of the debt percentage of the natural person, excess debt entity, New Zealand group, or worldwide group.
Reduction In the calculation of the debt percentage of the New Zealand group and a worldwide group, the amount of total group debt and total group assets is reduced by the outstanding balance of the ﬁnancial arrangement.
Debt percentage of New Zealand group In the calculation of the debt percentage of a New Zealand group, the reduction applies if the consideration for the ﬁnan- cial arrangement is at arm’s length, and person A is 1 of the following: (a) a non-resident who is not carrying on business through a ﬁxed establishment in New Zealand and who— (i) does not derive income that has a source in New Zealand: does derive income that has a source in New Zealand and, for all of that income, relief from New Zealand tax under a double tax agreement is available; or (ii) (b) (c) a person who is not associated with the excess debt en- tity; or a person who is associated with the excess debt entity but— (i) (ii) is not a member of the New Zealand group; and is a person to whom this subpart may apply under section FE 2.
1269 Part F s FE 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Debt percentage of worldwide group In the calculation of the debt percentage of a worldwide group, the reduction applies if person A is not associated with the excess debt entity.
Deﬁned in this Act: amount, associated person, business, double tax agreement, excess debt entity, ﬁnancial arrangement, ﬁxed establishment, natural person, New Zealand, non-resident, source in New Zealand, total group assets, total group debt Compare: 2004 No 35 s FG 6 Section FE 13(1): substituted (with effect on 30 June 2009), on 6 October 2009, by section 213(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 13(2): amended (with effect on 30 June 2009), on 6 October 2009, by section 213(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 13(3)(a): substituted (with effect on 30 June 2009), on 6 October 2009, by section 213(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 13 list of deﬁned terms double tax agreement: inserted (with ef- fect on 30 June 2009), on 6 October 2009, by section 213(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 13 list of deﬁned terms source in New Zealand: inserted (with effect on 30 June 2009), on 6 October 2009, by section 213(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Debt percentage of New Zealand group FE 14 Consolidation of debts and assets Company calculation For an excess debt entity that is a company, the debt percent- age of a New Zealand group is calculated under generally ac- cepted accounting practice for the consolidation of companies for the purposes of eliminating intra-group balances by con- solidating the debts and assets of the members of the entity’s New Zealand group.
Natural persons’ and trustees’ calculation For a natural person and an excess debt entity that is a trustee, the debt percentage of a New Zealand group is cal- culated under generally accepted accounting practice for the consolidation of companies for the purposes of eliminating (1) (2) 1270 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 14 intra-group balances by consolidating the debts and assets for the group.
(3) (4) When member not resident If a member of a New Zealand group is not resident in New Zealand, the assets and debts of the member are included in a consolidation only to the extent to which the assets and debts are for the group member to— (a) carry on business in New Zealand through a ﬁxed es- tablishment in New Zealand: derive income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable.
(b) Treatment of speciﬁed leases and particular interest expenditure In this subpart, in the determination of total group debt and total group assets and the calculation of an amount for which a deduction is denied,— (a) a speciﬁed lease under section FZ 2 (Effect of speciﬁed lease on lessor and lessee) is treated as a ﬁnancial ar- rangement that provides funds to the issuer; and expenditure incurred by the lessee under a speciﬁed lease for which a deduction is allowed under section BD 2 (Deductions) is treated as an amount of interest to which any of sections DB 6 to DB 8 (which relate to deductions for interest expenditure) applies; and interest that is allowed as a deduction under either of the following sections is treated as an amount of interest to which any of sections DB 6 to DB 8 applies, if not already allowed under those sections: (i) (ii) section DP 1(1)(b) (Expenditure of forestry busi- ness): section DV 10(1)(a) or (b) (Building societies).
Deﬁned in this Act: amount, associated person, business, company, deduction, double tax agreement, excess debt entity, ﬁnancial arrangement, ﬁxed estab- lishment, generally accepted accounting practice, interest, issuer, lessee, New Zealand, resident in New Zealand, source in New Zealand, speciﬁed lease, total group assets, total group debt, trustee Compare: 2004 No 35 ss FG 4(9), (15), (17), FG 9 (b) (c) 1271 Part F s FE 15 Income Tax Act 2007 Reprinted as at 1 January 2010 Section FE 14(2) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 214(1) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 14(2): substituted (with effect on 30 June 2009), on 6 October 2009, by section 214(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 14(3) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 214(1) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 14(3): substituted (with effect on 30 June 2009), on 6 October 2009, by section 214(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 14 list of deﬁned terms double tax agreement: inserted (with ef- fect on 30 June 2009), on 6 October 2009, by section 214(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 14 list of deﬁned terms source in New Zealand: inserted (with effect on 30 June 2009), on 6 October 2009, by section 214(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 15 Total group debt (1) Meaning In this subpart, for a New Zealand group, total group debt means the sum of the outstanding balances of— (a) ﬁnancial arrangements entered into by a natural person, or an excess debt entity, or another member of the New Zealand group, if the ﬁnancial arrangement— (i) provides funds to the natural person, the entity, or another member of the group; and gives rise to an amount for which the natural per- son, the entity, or another member of the group, would have a deduction: (ii) (b) (c) ﬁxed-rate foreign equity or ﬁxed-rate shares that are— issued by the entity or another member of the (i) New Zealand group; and held by a person resident in New Zealand: (ii) stapled debt securities— (i) issued by the entity or another member of the New Zealand group; and held by a person resident in New Zealand; and (ii) 1272 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 15 (2) (3) (iii) stapled to shares other than shares of a company that is a proportional-stapling company.
Exchange rate ﬂuctuations Subsection (1)(a)(ii) does not include a deduction for an amount that arises only from movement in currency exchange rates.

Section 90A Tax Administration Act 1994 For a determination on whether a ﬁnancial arrangement pro- vides funds, seesection 90A of the Tax Administration Act 1994.
Deﬁned in this Act: amount, deduction, excess debt entity, ﬁnancial arrange- ment, ﬁxed-rate foreign equity, natural person, New Zealand, proportional-sta- pling company, resident in New Zealand, stapled, stapled debt security Compare: 2004 No 35 s FG 4(2) Section FE 15(1) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 215(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 15(1): substituted (with effect on 30 June 2009), on 6 October 2009, by section 215(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 15(1)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 215(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 15(2) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 215(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 15(2): substituted (with effect on 30 June 2009), on 6 October 2009, by section 215(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 15 list of deﬁned terms ﬁxed-rate foreign equity: inserted (with effect on 30 June 2009), on 6 October 2009, by section 215(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 15 list of deﬁned terms proportional-stapling company: inserted (with effect on 1 April 2008), on 6 October 2009, by section 215(3) of the Tax- ation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 15 list of deﬁned terms resident in New Zealand: inserted (with effect on 1 April 2008), on 6 October 2009, by section 215(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 15 list of deﬁned terms stapled: inserted (with effect on 1 April 2008), on 6 October 2009, by section 215(3) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1273 Part F s FE 16 Income Tax Act 2007 Reprinted as at 1 January 2010 Section FE 15 list of deﬁned terms stapled debt security: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 215(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 16 Total group assets Meaning In this subpart, for a New Zealand group, total group assets for an income year means the total assets of a natural person, or an excess debt entity, or another member of the New Zealand group, measured under the following paragraphs, as applicable or as the person or entity chooses: (a) the value of the assets shown in the ﬁnancial statements of the entity’s New Zealand group; or the net current value of the assets; or (b) (c) market value, for trading stock that is valued at market value in calculating the person or entity’s income tax liability for the income year, or that of a member of the group; or adjusted tax value of a personal property lease asset at the start of the income year, in the case of a speciﬁed lease or a ﬁnance lease that is not recognised as an asset under generally accepted accounting practice; or if allowed under generally accepted accounting prac- tice, a combination of the ﬁnancial statement values and net current values.
(d) (e) CFC investments excluded If the excess debt entity or another member of the New Zealand group has an investment in a CFC in which the entity or member has an income interest, the value of the total group assets calculated and measured under this section does not include the value of the investment, except–– (a) to the extent to which— (i) the value of the investment represents the out- standing balances of ﬁnancial arrangements to which section FE 13 applies: the CFC derives income with a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable: (ii) (1) (1B) 1274 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 16 (b) that the value of the total group assets is treated as being $1 if the value would otherwise be zero as a result of this subsection.
(1C) (2) When member not resident If the excess debt entity or another member of a New Zealand group is not resident in New Zealand, the assets of the entity or member are included in the calculation and measurement of total group assets under this section only to the extent to which the assets are for the entity or member to— (a) carry on business in New Zealand through a ﬁxed es- tablishment in New Zealand: derive income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable.
(b) Generally accepted accounting practice The amount of total group assets must be calculated under gen- erally accepted accounting practice, with the exception of the values referred to in subsection (1)(c) or (d).
Deﬁned in this Act: adjusted tax value, amount, CFC, double tax agreement, ex- cess debt entity, ﬁnance lease, generally accepted accounting practice, income interest, income tax liability, income year, lease, market value, natural person, New Zealand, personal property lease asset, source in New Zealand, speciﬁed lease, trading stock Compare: 2004 No 35 s FG 4(3), (4) Section FE 16(1B) heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 216(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 16(1B): inserted (with effect on 30 June 2009), on 6 October 2009, by section 216(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 16(1C) heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 216(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 16(1C): inserted (with effect on 30 June 2009), on 6 October 2009, by section 216(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 16 list of deﬁned terms CFC: inserted (with effect on 30 June 2009), on 6 October 2009, by section 216(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 16 list of deﬁned terms double tax agreement: inserted (with ef- fect on 30 June 2009), on 6 October 2009, by section 216(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1275 Part F s FE 17 Income Tax Act 2007 Reprinted as at 1 January 2010 inserted (with effect Section FE 16 list of deﬁned terms income interest: on 30 June 2009), on 6 October 2009, by section 216(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 16 list of deﬁned terms source in New Zealand: inserted (with effect on 30 June 2009), on 6 October 2009, by section 216(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Debt percentage of worldwide group FE 17 Consolidation of debts and assets For an excess debt entity that is a company, the debt percentage of a worldwide group is calculated under generally accepted accounting practice for the consolidation of companies for the purposes of eliminating intra-group balances by consolidating the debts and assets of the members of the entity’s worldwide group using— (a) a ﬁnancial standard used in the country in which the entity’s ultimate non-resident parent company resides, as described in section FE 18(1)(a), if applicable; or generally accepted accounting practice.
(b) Deﬁned in this Act: company, excess debt entity, generally accepted accounting practice, non-resident company, ultimate parent Compare: 2004 No 35 s FG 5(2), (10) FE 18 Measurement of debts and assets of worldwide group Standards applying The amount of total group debt and the amount of total group assets of the worldwide group of an excess debt entity is cal- culated— (a) using a standard that is equivalent to generally accepted accounting practice for consistent and non-distorting ﬁ- nancial reporting; and in accordance with the ﬁnancial reporting standards of the country where the worldwide group’s consolidated ﬁnancial accounts are prepared.
(b) Date of measurement The amount of total group debt and the amount of total group assets of the worldwide group of an excess debt entity for an income year are measured using— (1) (2) 1276 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 18 (3) (4) (5) (a) (b) (c) the average amount at the end of each day of the income year; or the average amount at the end of each 3-month period in the income year; or the amount as at the worldwide group’s balance date that immediately precedes the income year.
Measurement of amounts Despite subsection (1), an excess debt entity must measure the amount of total group debt by applying section FE 15 as if it referred to a deduction that would be allowed if the entity, or another group member, were resident in New Zealand.

Commissioner’s estimate If an excess debt entity is unable to calculate the debt percent- age of their worldwide group for an income year, they may ask the Commissioner to estimate the percentage under this sub- part.
The estimate is then treated as the percentage applying for the purposes of this subpart.
Default percentage The debt percentage of the worldwide group of an excess debt entity is treated as 68.1818% in the following cases: (a) the entity is unable to calculate the percentage and does not ask the Commissioner to make an estimate under subsection (4): the Commissioner cannot reasonably estimate the debt percentage under subsection (4): no member of the entity’s worldwide group, other than the entity, is not resident in New Zealand.
(b) (c) Deﬁned in this Act: amount, Commissioner, deduction, excess debt entity, gen- erally accepted accounting practice, income year, resident in New Zealand, total group assets, total group debt Compare: 2004 No 35 s FG 5(2)–(5), (12), (13) Section FE 18(1): amended (with effect on 30 June 2009), on 6 October 2009, by section 217(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 18(2) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 217(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 18(2): substituted (with effect on 30 June 2009), on 6 October 2009, by section 217(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1277 Part F s FE 19 Income Tax Act 2007 Reprinted as at 1 January 2010 Section FE 18(3) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 217(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 18(3): substituted (with effect on 30 June 2009), on 6 October 2009, by section 217(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 18(4): amended (with effect on 30 June 2009), on 6 October 2009, by section 217(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 18(5): amended (with effect on 30 June 2009), on 6 October 2009, by section 217(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 18(5)(a): substituted (with effect on 30 June 2009), on 6 October 2009, by section 217(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 18 list of deﬁned terms natural person: repealed (with effect on 30 June 2009), on 6 October 2009, by section 217(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
New Zealand banking group FE 19 Banking group’s equity threshold Requirement for New Zealand banking group: formula A reporting bank must calculate the equity threshold of its New Zealand banking group for a tax year using the formula— 0.04 × (risk-weighted exposures − deductions from equity value).
Deﬁnition of items in formula In the formula,— (a) risk-weighted exposures is the sum of the following values: (i) for an asset included in a balance sheet, the regu- latory value of the asset: for an exposure not included in a balance sheet, the regulatory value of the exposure: for an amount of goodwill that is not taken into account in adjustment 4: intangible assets in determining the New Zealand net equity of the group under section FE 21, the ﬁnancial value of the goodwill: (ii) (iii) (1) (2) 1278 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 21 (3) (b) deductions from equity value is the total amount of the regulatory values of adjustments 1 to 10 referred to in section FE 21.
Assets of ﬁxed establishments For the purposes of this section, the assets of a ﬁxed establish- ment include those treated as assets of the ﬁxed establishment under generally accepted accounting practice.
Deﬁned in this Act: amount, ﬁnancial value, ﬁxed establishment, generally accepted accounting practice, New Zealand banking group, New Zealand net equity, regulatory value, reporting bank, tax year Compare: 2004 No 35 s FG 8H FE 20 Financial value and regulatory value (1) (2) Financial value In sections FE 19, and FE 21 to FE 23, the ﬁnancial value of an item for a New Zealand banking group at a time is the amount recorded for the item in the group’s ﬁnancial statements that— (a) (b) (c) relate to the time; and are prepared for external reporting purposes; and are consistent with generally accepted accounting prac- tice for the consolidation of a group of companies for the purposes of eliminating intra-group balances.
Regulatory value In section FE 19, the regulatory value of an item for a New Zealand banking group at a time is the total risk-weighted value for the item for the purposes of the Capital Adequacy Framework issued by the Reserve Bank of New Zealand act- ing in the prudential supervision of registered banks under the Reserve Bank of New Zealand Act 1989.
Deﬁned in this Act: amount, ﬁnancial value, generally accepted accounting practice, group of companies, issue, New Zealand, New Zealand banking group, registered bank, regulatory value Compare: 2004 No 35 s FG 8F FE 21 Banking group’s New Zealand net equity (1) Formula A reporting bank must calculate the New Zealand net equity of its New Zealand banking group for an income year using the formula— 1279 Part F s FE 21 Income Tax Act 2007 Reprinted as at 1 January 2010 equity value − adjustments 1 to 11.
Deﬁnition of items in formula The items in the formula are deﬁned in subsections (3) to (14).
Equity value Equity value is the total ﬁnancial value of— (a) (b) the shareholders’ equity for the group; and the branch equity relating to ﬁxed establishments of the group; and any shares issued by a member of the group whose value is not included under paragraph (a) or (b); and any ﬁnancial arrangement that is a loan or provision of funds— (i) (c) (d) that is not taken into account in calculating the group’s funding debt for the tax year correspond- ing to the income year; and that is made by a non-resident who is not a member of the New Zealand banking group or associated with a member of the group under the parts of subpart YB (Associated persons and nominees) that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or the 1988 version provisions; and that is made to a member of the group; and that does not give rise to interest expenditure other than as a result of a ﬂuctuation in the value of a currency of a country relative to the value of a currency of another country; and whose value is not included under paragraph (a) or (b); and that does not relate to a supply of goods or ser- vices; and (ii) (iii) (iv) (v) (vi) (e) an instrument speciﬁed by the Governor-General by Order in Council under section FE 24 as included in equity value, but excluding an instrument speciﬁed under that section as not being an item of equity value.
(2) (3) 1280 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 21 (4) Fixed-rate shares Adjustment 1 is the ﬁnancial value of ﬁxed-rate foreign equi- ties or ﬁxed-rate shares that are— (a) issued by a member of the group on or after 1 Janu- ary 2005, or before that date if the measurement period starts on or after 1 January 2010; and owned by a person resident in New Zealand; and included in equity value under subsection (3).
(b) (c) Stapled debt securities (4B) Adjustment 1A is the ﬁnancial value of stapled debt securities that are— (a) (b) (c) owned by a person resident in New Zealand; and included in equity value under subsection (3); and stapled to shares other than shares of a company that is a proportional-stapling company.
(5) (6) (7) Tax debts Adjustment 2 is the ﬁnancial value of a tax debt that is a ﬁnancial arrangement— (a) included in equity value under subsection (3)(a) to (c); and in relation to which a member of the group is allowed a deduction for the corresponding tax year for interest to which any of sections DB 6 to DB 8 (which relate to interest expenditure) applies.
(b) Policyholder liabilities and retained proﬁts Adjustment 3 is the ﬁnancial value of unvested policyholder beneﬁt liabilities and policyholder retained proﬁts included in equity value under subsection (3).
Intangible assets Adjustment 4 is the ﬁnancial value of intangible assets, but does not include the value of— (a) the goodwill of a business that is not a banking, ﬁnan- cing, leasing, or life insurance business— (i) acquired from a person who, at the time of ac- quisition, is not associated with a member of the group under the parts of subpart YB that apply for the purposes of the whole Act (excluding the 1281 Part F s FE 21 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) 1973, 1988, and 1990 version provisions) or the 1988 version provisions; or relating to an entity that is acquired from a person who is not associated with a member of the group under the parts of subpart YB that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or the 1988 version provisions: (b) (c) a ﬁlm or ﬁlm right: property that is depreciable property or is expected to become depreciable property.
Capital gains Adjustment 5 is the total amount of capital gain arising for the 2004–05 income year or a later income year from a transfer of an intangible asset between a member of the group and a person who is associated with a member of the group under the parts of subpart YB that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or the 1988 version provisions.
(8) (9) Asset revaluation reserves Adjustment 6 is the ﬁnancial value of revaluation reserves included in equity value under subsection (3).
Future tax beneﬁts (10) Adjustment 7 is the ﬁnancial value of net future tax beneﬁts included in equity value under subsection (3) that arise from— a tax loss for the tax year corresponding to the income (a) year referred to in subsection (1): a loss balance carried forward from an earlier tax year: a timing or temporary difference to the extent to which the item giving rise to the difference would contribute to the amount of a tax loss for the tax year corresponding to the income year referred to in subsection (1) if allowed as a deduction.
(b) (c) Prudential deductions (11) Adjustment 8 is the ﬁnancial value of a credit enhancement or advance that is, for the purposes of the Capital Adequacy Framework described in section FE 20(2),— 1282 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 21 (a) (b) a credit enhancement that a member of the group pro- vides to— (i) an associated funds management and securitisa- tion scheme of a non-member: an afﬁliated insurance group that is a non-mem- ber when the credit has not been expensed: an advance by a member of the group of a capital nature to a connected person who is a non-member.
(ii) Offshore assets (12) Adjustment 9 is the ﬁnancial value of shares in a non-resident company that— (a) are held by— (i) (ii) a member or potential member of the group; or a company resident in New Zealand in which a member or potential member of the group holds a direct voting interest of 10% or more and that, in the income year, pays to the member or potential member a dividend to which a conduit tax relief (CTR) credit is attached; and (b) (c) are not interests in a foreign investment fund (FIF) for which the FIF income or FIF loss is calculated using the comparative value method, the deemed rate of re- turn method, the fair dividend rate method, or the cost method; and are not shares in a grey list company that— (i) are listed on the ofﬁcial list of a recognised ex- change; and are revenue account property; and (ii) (iii) would not be a sufﬁcient interest in the company if the class of shares were the only class of share issued by the company.
Cross holdings (13) Adjustment 10 is the ﬁnancial value of— (a) interests included in equity value under subsection (3) held by a person who— (i) is not a member of the group because of an ex- clusion under section FE 35; and is resident in New Zealand or holds the interest through a ﬁxed establishment in New Zealand: (ii) 1283 Part F s FE 21 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) shares in or loans (other than on an arm’s length basis) to a person who is not a member of the group because of an exclusion under section FE 35.
Notional offshore investments (14) Adjustment 11 is the amount of notional offshore investment for the group for the income year under section FE 22.

Components of adjustment items counted once (15) For the purposes of this section, if a component of an item described in adjustments 1 to 10 is a component of 1 or more other adjustment items, the value of the component is counted once only at its highest value.
Deﬁned in this Act: 1973 version provisions, 1988 version provisions, 1990 version provisions, amount, associated person, business, company, compara- tive value method, cost method, CTR credit, deduction, deemed rate of return method, depreciable property, direct voting interest, dividend, fair dividend rate method, FIF, FIF income, FIF loss, ﬁlm, ﬁlm right, ﬁnancial arrangement, ﬁ- nancial value, ﬁxed establishment, ﬁxed-rate share, grey list company, group funding debt, income year, interest, loan, loss balance, measurement period, New Zealand, New Zealand banking group, New Zealand net equity, non-resi- dent, non-resident company, notional offshore investment amount, pay, propor- tional-stapling company, recognised exchange, reporting bank, resident in New Zealand, revenue account property, share, shareholder, stapled, stapled debt se- curity, tax, tax loss Compare: 2004 No 35 s FG 8G(1)–(3) Section FE 21(3)(d)(ii): substituted (with effect on 1 April 2008), on 6 October 2009, by section 218(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 21(4): amended (with effect on 30 June 2009), on 6 October 2009, by section 218(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 21(4B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 218(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 21(4B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 218(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 21(7)(a)(i): substituted (with effect on 1 April 2008), on 6 October 2009, by section 218(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 21(7)(a)(ii): substituted (with effect on 1 April 2008), on 6 October 2009, by section 218(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 21(8): substituted (with effect on 1 April 2008), on 6 October 2009, by section 218(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1284 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 22 Section FE 21 list of deﬁned terms proportional-stapling company: inserted (with effect on 1 April 2008), on 6 October 2009, by section 218(9) of the Tax- ation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 21 list of deﬁned terms stapled: inserted (with effect on 1 April 2008), on 6 October 2009, by section 218(9) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 21 list of deﬁned terms stapled debt security: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 218(9) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 22 Notional offshore investment When this section applies This section applies for the purposes of section FE 21(14) to determine an amount of notional offshore investment for a New Zealand banking group for an income year.
Formula The amount of notional offshore investment is calculated using the formula— (1) (2) (3) Deﬁnition of items in formula In the formula,— (a) foreign tax credits is the total amount of foreign tax credits for the tax year corresponding to the income year claimed as a credit against the income tax liability for the tax year of a member of the group or a person ex- cluded from the group under section FE 35 that does not arise from— (i) (ii) threshold is— (i) attributed CFC income or from FIF income; or income derived before 1 July 2005. the amount set by the Governor-General by Order in Council as the threshold amount for the pur- poses of this subsection; or $416,667 multiplied by the number of months beginning on or after 1 July 2005 in the income year that includes that date, if no threshold is set under subparagraph (i): (ii) (b) 1285 Part F s FE 23 Income Tax Act 2007 Reprinted as at 1 January 2010 (iii) (c) (d) $5,000,000 if no threshold amount is set under subpara- graph (i) or (ii): tax rate is the rate of tax for companies set out in sched- ule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) for the tax year corresponding to the income year referred to in subsection (1): interest rate of return is— (i) the percentage amount set by the Governor-Gen- eral by Order in Council as the interest rate of return for the purposes of this subsection; or 7%, if no interest rate of return is set under sub- paragraph (i): (ii) (e) months is the number of months beginning on or after 1 July 2005 in the corresponding income year.
Deﬁned in this Act: amount, attributed CFC income, corresponding income year, FIF income, income, income tax liability, income year, interest, New Zealand banking group, notional offshore investment amount, tax year Compare: 2004 No 35 s FG 8G(4) Section FE 22(3)(c): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
FE 23 Banking group’s funding debt Formula A reporting bank must calculate the funding debt of its New Zealand banking group for a tax year using the formula— Deﬁnition of items in formula In the formula,— (a) (b) total interest is the ﬁnancial value of the total interest- bearing debt for the group, measured on the last day of a quarter in the reporting bank’s corresponding income year: interest deductions is the ﬁnancial value not included in paragraph (a) of a ﬁnancial arrangement in relation to which the group has a deduction for interest to which any of sections DB 6 to DB 8 (which relate to interest expenditure) applies, other than as a consequence of (1) (2) 1286 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 24 (c) a ﬂuctuation in the value of a currency of a country relative to the value of a currency of another country: shares is the ﬁnancial value of shares included in para- graph (a), measured on the last day of a quarter in the reporting bank’s corresponding income year: days in quarter is the number of days in a quarter in the reporting bank’s corresponding income year.
Deﬁned in this Act: corresponding income year, deduction, ﬁnancial arrange- ment, ﬁnancial value, interest, New Zealand banking group, quarter, reporting bank, share, tax year Compare: 2004 No 35 s FG 8B(3) (d) FE 24 Regulations (1) (2) When this section applies This section applies for the purposes of sections FE 21 and FE 22.
Speciﬁcations The Governor-General may, from time to time, by Order in Council— (a) specify a type of instrument that is included in equity value under section FE 21(3): specify a type of instrument that is not included in equity value under section FE 21(3): set, replace, or repeal a ﬁgure for a threshold amount for a value of an instrument, or aggregate value of a type of instrument, held by a person or group of persons for the purposes of a speciﬁcation under paragraph (a) or (b): amend or delete a speciﬁcation under paragraphs (a) to (c): set, replace, or repeal a ﬁgure for the threshold amount for the purposes of the deﬁnition of threshold in section FE 22(3)(b)(i): set, replace, or repeal a ﬁgure for the deﬁnition of in- terest rate of return in section FE 22(3)(d)(i).
(b) (c) (d) (e) (f) (3) Application or effective date An Order in Council under subsection (2) may— (a) (b) come into effect on or after 1 July 2005: apply for measurement periods and quarters that— 1287 Part F s FE 25 Income Tax Act 2007 Reprinted as at 1 January 2010 (i) are in the 2005–06 income year or a later income year; and commence on or after 1 July 2005.
Deﬁned in this Act: amount, group of persons, income year, interest, measure- ment period, quarter Compare: 2004 No 35 s FG 8G(5), (6) (ii) Determining membership of groups New Zealand group FE 25 New Zealand group for excess debt entity that is a company Steps to determine membership The following steps are used to determine the membership of the New Zealand group of an excess debt entity that is a com- pany: (a) (b) identifying the New Zealand parent, see section FE 26: establishing the companies under the parent’s control, see section FE 27: identifying the members of the New Zealand group, see sections FE 28 and FE 29: if a non-resident has ownership interests in 2 or more New Zealand groups, establishing whether the groups may be combined into a single New Zealand group, see section FE 30.
(c) (d) Entity as company Sections FE 26 to FE 30 apply only to an excess debt entity that is company.

However, section FE 30 does not apply to an excess debt outbound company.
Deﬁned in this Act: company, control, excess debt entity, excess debt outbound company, New Zealand, non-resident Compare: 2004 No 35 s FG 4(10), (11) Section FE 25(2): amended (with effect on 30 June 2009), on 6 October 2009, by section 219(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 25 list of deﬁned terms excess debt outbound company: inserted (with effect on 30 June 2009), on 6 October 2009, by section 219(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(1) (2) 1288 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 26 FE 26 Identifying New Zealand parent (1) (2) (3) Identifying resident company The New Zealand parent of an excess debt entity is the entity identiﬁed in whichever is applicable of subsections (2) to (6).
Entity as parent The excess debt entity is treated as the New Zealand parent if— (a) (b) the entity is not resident in New Zealand; or the entity is resident in New Zealand, and— (i) (ii) a non-resident has a direct ownership interest in the entity of 50% or more, as determined under section FE 39; and no single non-resident who is carrying on busi- ness in New Zealand through a ﬁxed establish- ment in New Zealand or who derives income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agree- ment is unavailable has an ownership interest in the entity of 50% or more; or (c) the entity is an excess debt outbound company and no single company resident in New Zealand has an owner- ship interest in the entity of 50% or more.
Top tier New Zealand resident company if not excess debt outbound company If subsection (2) does not apply, and the excess debt entity is not an excess debt outbound company, the entity’s New Zealand parent is the company (company A) that meets all the following requirements: (a) company A is either— (i) (ii) resident in New Zealand; or not resident in New Zealand but carrying on busi- ness in New Zealand through a ﬁxed establish- ment in New Zealand; or not resident in New Zealand but deriving income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and (iii) (b) company A has an ownership interest in the entity; and 1289 Part F s FE 26 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) (d) (e) a non-resident has a direct ownership interest in com- pany A; and if company A is resident in New Zealand, a non-resident who has an ownership interest in the entity of 50% or more, also has an ownership interest in company A of 50% or more; and no company that meets the requirements of paragraphs (a) to (d) has a direct ownership interest in company A.
When parent controlled by non-resident Despite subsection (3), if the interest apportionment rule in section FE 6 applies to the excess debt entity only through the application of section FE 2(1)(c)(ii), the entity’s New Zealand parent is the company (company B) that meets all the follow- ing requirements: (a) company B is either— (i) (ii) resident in New Zealand; or not resident in New Zealand but carrying on busi- ness in New Zealand through a ﬁxed establish- ment in New Zealand; or not resident in New Zealand but deriving income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and (iii) (b) (c) (d) company B has an ownership interest in the entity; and if company B is resident in New Zealand, a non-resident who has control of the entity by any means, has control of company B by any means; and no company that meets the requirements of paragraphs (a) to (c) has a direct ownership interest in company B.
Top tier New Zealand resident company for excess debt outbound company If subsection (2) does not apply, and the excess debt entity is an excess debt outbound company, the entity’s New Zealand parent is the company (company C) that meets all the follow- ing requirements: (a) company C— (i) (ii) is resident in New Zealand; and has an ownership interest of 50% or more in the entity; and (4) (4B) 1290 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 26 (b) no company that meets the requirements of paragraph (a)(i) and (ii) has a direct ownership interest in company C. (5) (6) (7) Tie-breaker If more than 1 company is identiﬁed as New Zealand parent under subsection (3) or (4), the New Zealand parent is the com- pany that has the highest value in ownership interests calcu- lated by multiplying— (a) the total direct ownership interests in company A or company B of non-residents who also have ownership interests in the entity of 50% or more: the ownership interests of company A or company B in the entity.
(b) Entity as parent If subsection (2) does not apply, and no company meets the requirements of subsection (3), (4), or (4B), the excess debt entity is treated as the New Zealand parent.

Determining ownership interests in subsections (3) and (4) In subsections (3) to (4B), ownership interests are determined under sections FE 38 to FE 41, but for the purpose of iden- tifying a New Zealand parent, the ownership interests of an associated person are ignored.
Deﬁned in this Act: associated person, business, company, control, double tax agreement, excess debt entity, excess debt outbound company, ﬁxed establish- ment, interest, New Zealand, non-resident, non-resident company, resident in New Zealand, source in New Zealand Compare: 2004 No 35 s FG 4(10) Section FE 26(2)(b)(ii): substituted (with effect on 30 June 2009), on 6 October 2009, by section 220(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 26(2)(b)(ii): amended (with effect on 30 June 2009), on 6 October 2009, by section 220(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 26(2)(c): added (with effect on 30 June 2009), on 6 October 2009, by section 220(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 26(3) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 220(3) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 26(3): amended (with effect on 30 June 2009), on 6 October 2009, by section 220(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1291 Part F s FE 27 Income Tax Act 2007 Reprinted as at 1 January 2010 Section FE 26(3)(a)(ii): amended (with effect on 30 June 2009), on 6 October 2009, by section 220(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 26(3)(a)(iii): added (with effect on 30 June 2009), on 6 October 2009, by section 220(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 26(4)(a)(ii): amended (with effect on 30 June 2009), on 6 October 2009, by section 220(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 26(4)(a)(iii): added (with effect on 30 June 2009), on 6 October 2009, by section 220(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 26(4B) heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 220(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 26(4B): inserted (with effect on 30 June 2009), on 6 October 2009, by section 220(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 26(6): substituted (with effect on 30 June 2009), on 6 October 2009, by section 220(8) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 26(7): substituted (with effect on 30 June 2009), on 6 October 2009, by section 220(9) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 26 list of deﬁned terms double tax agreement: inserted (with ef- fect on 30 June 2009), on 6 October 2009, by section 220(10) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 26 list of deﬁned terms excess debt outbound company: inserted (with effect on 30 June 2009), on 6 October 2009, by section 220(10) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 26 list of deﬁned terms source in New Zealand: inserted (with effect on 30 June 2009), on 6 October 2009, by section 220(10) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

FE 27 Establishing companies under parent’s control Choosing threshold A control threshold that the New Zealand parent of an excess debt entity chooses under this section must apply consistently to all companies that are members of the group.
Percentages The New Zealand parent of an excess debt entity may choose as the relevant control threshold a percentage that is either— (1) (2) 1292 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 27 (3) (4) (5) (6) (a) more than 50%; or 66% or more.
(b) Threshold over 50% For a control threshold that is more than 50%, the company or companies treated as controlled by the New Zealand parent are those in which direct ownership interests of more than 50% are held collectively by either or both— the New Zealand parent; and (a) any other company included in the New Zealand group.
(b) Threshold of 66% or more For a control threshold of 66% or more, the companies treated as controlled by the New Zealand parent are those in which direct ownership interests of 66% or more are held collectively by any combination of— (a) (b) the New Zealand parent; and a non-resident if— (i) (ii) they have ownership interests of 50% or more in both the entity and the New Zealand parent; and a company included in the New Zealand group as a result of the control percentage would have been included in the group under section FE 28 through the application of the control test in sub- section (3), had the control percentage in that subsection been chosen; and (c) any other company or companies that are included in the New Zealand group under section FE 28 through the application of any of these paragraphs.
Default threshold of 66% If the New Zealand parent does not choose a control threshold under subsection (3) or (4), the control threshold applying to the New Zealand group is 66% or more.

Application to other companies of New Zealand parent The control threshold applying for an income year in relation to the entity and its New Zealand parent applies to any com- pany of the New Zealand parent.
Deﬁned in this Act: company, control, excess debt entity, income year, New Zealand, non-resident Compare: 2004 No 35 s FG 4(12)–(14B) 1293 Part F s FE 28 Income Tax Act 2007 Reprinted as at 1 January 2010 FE 28 Identifying members of New Zealand group New Zealand parent’s group A New Zealand group is made up of an excess debt entity, the entity’s New Zealand parent, and a company— (a) that is— (i) (ii) (iii) resident in New Zealand: carrying on a business in New Zealand through a ﬁxed establishment in New Zealand: deriving income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and that is identiﬁed under section FE 27 as being under the control of the New Zealand parent; and that is not a member of the New Zealand banking group of a registered bank.
(b) (c) Special rule for some entity’s group Despite subsection (1), if the excess debt entity is not an ex- cess debt outbound company and is not a company identi- ﬁed under section FE 27 as being under the control of the New Zealand parent because the threshold is not met, the New Zealand group is made up of the entity and a company— (a) that is— (i) (ii) (iii) resident in New Zealand: carrying on a business in New Zealand through a ﬁxed establishment in New Zealand: deriving income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and (b) that is a company that— (i) (ii) would be identiﬁed under section FE 27 as being under the control of the entity if the entity were treated as the New Zealand parent; or if the entity is identiﬁed under section FE 27 as being under the control of another company (company A), would be identiﬁed under section FE 27 as under the control of company A if com- pany A were included in the New Zealand group and treated as the New Zealand parent; or (1) (2) 1294 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 29 (iii) would be identiﬁed under section FE 27 as under the control of a company (company B) included in the entity’s New Zealand group under subpara- graph (ii), if company B were treated as the New Zealand parent; or is not a member of the New Zealand banking group of a registered bank.
(iv) (3) Another special rule for some other entity’s group Despite subsection (1), if the excess debt entity is an excess debt outbound company and is not a company identiﬁed under section FE 27 as being under the control of the New Zealand parent because the threshold is not met, the entity is included in the New Zealand group for the New Zealand parent if— (a) the entity is a company that meets the requirements of subsection (1)(a) and (c); and a member of the New Zealand group has a 50% or more ownership interest in the entity.
(b) Deﬁned in this Act: business, company, control, double tax agreement, excess debt entity, excess debt outbound company, ﬁxed establishment, New Zealand, New Zealand banking group, registered bank, resident in New Zealand, source in New Zealand Section FE 28: substituted (with effect on 30 June 2009), on 6 October 2009, by section 221(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 29 Combining New Zealand groups owned by natural persons and trustees (1) When this section applies This section applies when a natural person or trustee described in section FE 2(1)(g) has–– (a) a 50% or more ownership interest in a member of a New Zealand group (group 1) having a member that is an excess debt outbound company; and a 50% or more ownership interest in a member of a dif- ferent New Zealand group (group 2) having a member that is an excess debt outbound company.
(b) (2) Groups combine Group 1 and group 2 combine into 1 New Zealand group.

Deﬁned in this Act: excess debt outbound company, New Zealand 1295 Part F s FE 30 Income Tax Act 2007 Reprinted as at 1 January 2010 Section FE 29: substituted (with effect on 30 June 2009), on 6 October 2009, by section 222(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 30 Ownership interests in companies outside New Zealand group When this section applies This section applies when— (a) (b) a New Zealand group is in existence; and a particular excess debt entity (company A) that is not an excess debt outbound company is outside the group; and company A is— (i) (ii) resident in New Zealand: carrying on business in New Zealand through a ﬁxed establishment in New Zealand: deriving income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and a single non-resident has ownership interests of 50% or more in both— (i) (ii) the New Zealand group; and company A.
(iii) (c) (d) Consistency in group membership The New Zealand parent of company A may choose to include the company in the New Zealand group if every company to be included in the enlarged group that is a New Zealand parent in the group makes the same election in relation to all other companies that are not in a New Zealand group with that parent before this section applies.
When company A cannot be part of group Despite subsection (2), company A cannot be part of the New Zealand group if— (a) another company (company B) that is outside the group has a direct ownership in company A; and company B is— (i) (ii) resident in New Zealand: carrying on business in New Zealand through a ﬁxed establishment in New Zealand: (b) (1) (2) (3) 1296 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 31 (iii) deriving income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and (c) either— (i) a New Zealand parent in the group, after the ap- plication of subsection (2), has control of com- pany B under section FE 27(3); or the single non-resident has ownership interests of 50% or more in company B.
(ii) Deﬁned in this Act: business, company, control, double tax agreement, excess debt entity, excess debt outbound company, ﬁxed establishment, New Zealand, non-resident, resident in New Zealand, source in New Zealand Compare: 2004 No 35 s FG 4(14D) Section FE 30(1)(b): substituted (with effect on 30 June 2009), on 6 October 2009, by section 223(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 30(1)(c): substituted (with effect on 30 June 2009), on 6 October 2009, by section 223(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 30(3)(b): substituted (with effect on 30 June 2009), on 6 October 2009, by section 223(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 30 list of deﬁned terms double tax agreement: inserted (with ef- fect on 30 June 2009), on 6 October 2009, by section 223(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 30 list of deﬁned terms excess debt outbound company: inserted (with effect on 30 June 2009), on 6 October 2009, by section 223(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 30 list of deﬁned terms source in New Zealand: inserted (with effect on 30 June 2009), on 6 October 2009, by section 223(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Worldwide group FE 31 Worldwide group for corporate excess debt entity if not excess debt outbound company (1) Members of worldwide group For an income year, for an excess debt entity that is a com- pany and is not an excess debt outbound company, a world- wide group is made up of— the entity; and (a) 1297 Part F s FE 31 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) (d) (e) (f) (g) the entity’s New Zealand group for the income year; and the entity’s worldwide GAAP group, as described in subsection (2); and the entity’s ultimate non-resident parent, as described in subsection (3); and the ultimate non-resident parent’s worldwide GAAP group, as described in subsection (4); and any non-resident that— (i) (ii) is not a company; and has ownership interests in the entity of 50% or more; and any person associated with the non-resident referred to in paragraph (f).
(2) (3) Worldwide GAAP group An excess debt entity’s worldwide GAAP group is made up of all non-residents who are required to be included with the entity in the consolidated ﬁnancial statements under, as the entity chooses,— (a) (b) generally accepted accounting practice; or an equivalent standard for consistent and non-distorting ﬁnancial reporting that is— (i) set in the country where the ultimate non-resident parent of the parent, as described in subsection (3), resides; or applied when preparing the consolidated ﬁnan- cial statements of the international group of which the entity is part.
(ii) Ultimate non-resident parent An excess debt entity’s ultimate non-resident parent is the company that meets the following requirements: (a) the company has ownership interests in the entity of 50% or more; and the company is not excluded from the entity’s world- wide group under section FE 32; and no other company has both— (i) an ownership interest in the entity of 50% or more: an ownership interest in the company referred to in paragraphs (a) and (b).
(b) (c) (ii) 1298 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 31B (4) (5) Ultimate non-resident parent’s worldwide GAAP group The ultimate non-resident parent’s worldwide GAAP group is made up of— (a) (b) the ultimate non-resident parent; and any non-resident who is required to be included with the ultimate non-resident parent in consolidated group accounts under, as the non-resident parent chooses,— (i) the standard referred to in subsection (2)(b)(i), if applicable; or generally accepted accounting practice.
(ii) Measuring ownership interests In subsection (3), ownership interests are determined under sections FE 38 to FE 41.
Deﬁned in this Act: associated person, company, excess debt entity, excess debt outbound company, generally accepted accounting practice, income year, New Zealand, non-resident, ultimate parent Compare: 2004 No 35 s FG 5(8) Section FE 31 heading: substituted (with effect on 30 June 2009), on 6 October 2009, by section 224(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 31(1): amended (with effect on 30 June 2009), on 6 October 2009, by section 224(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 31(1)(a): substituted (with effect on 30 June 2009), on 6 October 2009, by section 224(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 31 list of deﬁned terms excess debt outbound company: inserted (with effect on 30 June 2009), on 6 October 2009, by section 224(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 31B Worldwide group for excess debt outbound companies (1) Members of worldwide group For an income year, a worldwide group for an excess debt outbound company is made up of— (a) (b) the company; and the company’s New Zealand group for the income year; and the company’s worldwide GAAP group, as described in subsection (2).
(c) 1299 Part F s FE 31C Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Worldwide GAAP group An excess debt outbound company’s worldwide GAAP group is made up of all non-residents who are required to be included with the company in consolidated ﬁnancial statements under generally accepted accounting practice.
Deﬁned in this Act: excess debt outbound company, generally accepted ac- counting practice, income year, non-resident Section FE 31B: inserted (with effect on 30 June 2009), on 6 October 2009, by section 225(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 31C CFCs in worldwide group for natural persons or trustees described in section FE 2(1)(g) (1) (2) (3) When this section applies This section applies when a natural person or trustee described in section FE 2(1)(g) has— (a) a 50% or more ownership interest in an excess debt out- bound company that is a member of a worldwide group (worldwide group A); and an income interest in a CFC that is not part of the world- wide group A.

(b) Transfer The CFC is part of the worldwide group A.
Ownership interests For the purposes of this section, ownership interests are deter- mined under sections FE 38 to FE 41.

Deﬁned in this Act: CFC, excess debt outbound company, income interest, New Zealand, non-resident Section FE 31C: inserted (with effect on 30 June 2009), on 6 October 2009, by section 225(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FE 32 Joint venture parties (1) What this section applies to This section applies to a company (the joint venture com- pany) in a worldwide group under section FE 31 or FE 31B if— 1300 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 33 (a) (b) (c) a person (the excluded joint venturer) holds an owner- ship interest equal to 50% in the joint venture company; and 1 other person (the included joint venturer) in the worldwide group holds an ownership interest equal to 50% in the joint venture company; and but for the application of this section, the worldwide group includes every person who holds both an owner- ship interest equal to 50% in the joint venture company and–– (i) who has an ownership interest in the included joint venturer; or in whom the included joint venture company has an ownership interest.
(ii) (2) (3) Exclusion of excluded joint venturer The joint venture company may choose to exclude the ex- cluded joint venturer from its worldwide group for an income year, despite sections FE 31 and FE 31B.

Ownership interests For the purposes of this section, ownership interests are deter- mined under sections FE 38 to FE 41.
Deﬁned in this Act: company, excess debt entity, income year Section FE 32: substituted (with effect on 30 June 2009), on 6 October 2009, by section 226(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
New Zealand banking group FE 33 New Zealand banking group (b) The following steps are used to determine the membership of a New Zealand banking group: (a) identifying the ultimate parent of a registered bank, seesection FE 34: determining whether a person may be excluded from a banking group, seesection FE 35: identifying a person and a ﬁxed establishment as a member of a banking group, seesection FE 36.
Deﬁned in this Act: ﬁxed establishment, New Zealand banking group, regis- tered bank, ultimate parent (c) 1301 Part F s FE 34 Income Tax Act 2007 Reprinted as at 1 January 2010 FE 34 Identifying ultimate parent (1) (2) (3) (4) Identifying company The ultimate parent is the company identiﬁed in subsection (2) or (3), as applicable.
Registered bank’s parent An ultimate parent of a registered bank is a company— (a) that has an ownership interest in the registered bank of 50% or more; and in which no other company that has an ownership inter- est in the registered bank of 50% or more has an own- ership interest.

(b) Fixed establishment’s parent The ultimate parent of a registered bank’s ﬁxed establishment in New Zealand is the registered bank.
Ownership interests For the purposes of this section, ownership interests are deter- mined under sections FE 38 to FE 41.

Deﬁned in this Act: company, ﬁxed establishment, New Zealand, registered bank, ultimate parent Compare: 2004 No 35 s FG 8C(9), (10) FE 35 Persons who may be excluded from banking groups Reporting bank’s exclusions A reporting bank may determine the members of its New Zealand banking group by excluding from the group a person or ﬁxed establishment described in subsections (2) to (5).
Life insurance providers A reporting bank may choose to exclude from its New Zealand banking group a person or a ﬁxed establishment whose main activity is providing life insurance.
Entity owning life insurer or banker A reporting bank may choose to exclude from its New Zealand banking group a person resident in New Zealand— (a) who has a voting interest of 100% in a person excluded under subsection (2); and (1) (2) (3) 1302 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 36 (b) whose main activity is not banking, ﬁnancing, or leas- ing, or the ownership or control of an entity whose main activity is banking, ﬁnancing, or leasing.
(4) (5) Resident group company with other activities A reporting bank may choose to exclude from its New Zealand banking group a person resident in New Zealand— (a) who is required under generally accepted accounting practice to be included in consolidated group accounts with a person or ﬁxed establishment excluded under subsection (2) or (3); and whose main activity is not banking, ﬁnancing, or leas- ing, or the ownership or control of an entity whose main activity is banking, ﬁnancing, or leasing.
(b) Fixed establishment with other activities A reporting bank may choose to exclude from its New Zealand banking group a ﬁxed establishment of a non-resident if— (a) the non-resident has a voting interest of 100% in a per- son excluded under subsection (2); and the ﬁxed establishment has a main activity of ﬁnancing the person excluded under subsection (2); and the main activity of the ﬁxed establishment is not bank- ing, ﬁnancing, or leasing, or the ownership or control of an entity whose main activity is banking, ﬁnancing, or leasing.
(b) (c) Deﬁned in this Act: company, control, ﬁxed establishment, generally accepted accounting practice, life insurance, New Zealand banking group, non-resident, reporting bank, resident in New Zealand, voting interest Compare: 2004 No 35 s FG 8C(8) FE 36 Identifying members of New Zealand banking group (1) (2) Entities included in group The New Zealand banking group of a registered bank includes the entities described in subsection (2), and may also include the entities described in subsections (3) to (6) if the conditions set out in those subsections are met.
Registered bank or ﬁxed establishment The banking group includes— (a) the registered bank, if resident in New Zealand: 1303 Part F s FE 36 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the registered bank’s ﬁxed establishment, if the regis- tered bank is not resident in New Zealand.
(3) (4) (5) Resident person in group with registered bank A resident person is included in the banking group if— (a) the person is part of the same group of companies as the registered bank: the following conditions under generally accepted ac- counting practice are met: (i) (b) (ii) for a resident registered bank with no non-resi- dent ultimate parent, the consolidated group ac- counts include both the person and the registered bank, or would include both but for relevant ma- teriality thresholds; or registered bank with no for a non-resident the consolidated non-resident ultimate parent, group accounts would include the person and the registered bank if the bank were resident in New Zealand and the relevant materiality thresholds were met.
Resident in group with non-resident ultimate parent A resident is included in the banking group if— (a) the person is part of the same group of companies as a non-resident ultimate parent: under generally accepted accounting practice, the con- solidated group accounts would include the person and the ultimate parent if the ultimate parent were resident in New Zealand and the relevant materiality thresholds were met.
(b) Fixed establishment in group with registered bank A ﬁxed establishment in New Zealand of a non-resident is in- cluded in the banking group separately from the non-resident if— (a) the ﬁxed establishment is part of the same group of companies as a non-resident registered bank with no non-resident ultimate parent: under generally accepted accounting practice, the con- solidated group accounts would include the ﬁxed estab- lishment and the registered bank if the registered bank (b) 1304 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 37 were resident in New Zealand and the relevant materi- ality thresholds were met.
(6) Fixed establishment in group with non-resident ultimate parent A ﬁxed establishment in New Zealand of a non-resident is in- cluded in the banking group separately from the non-resident if— (a) the ﬁxed establishment is part of the same group of com- panies as a non-resident ultimate parent: under generally accepted accounting practice, the con- solidated group accounts would include the ﬁxed estab- lishment and the ultimate parent if the ultimate parent were resident in New Zealand and the relevant materi- ality thresholds were met.
(b) Deﬁned in this Act: ﬁxed establishment, generally accepted accounting prac- tice, group of companies, New Zealand, New Zealand banking group, non-resi- dent, registered bank, resident in New Zealand, ultimate parent Compare: 2004 No 35 s FG 8C(1), (2), (4)–(7) Section FE 36(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 227(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 36(4)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 227(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FE 36(5)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 227(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FE 36(6)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 227(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

FE 37 Reporting bank for New Zealand banking group (1) When subsection (2) applies Subsection (2) applies on a day when a New Zealand banking group has either— (a) (b) a single registered bank, or no registered bank but a ﬁxed establishment of a single registered bank.
Registered bank The reporting bank for the day is the registered bank.

(2) 1305 Part F s FE 38 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) When subsection (4) applies Subsection (4) applies on a day when a New Zealand banking group has either— (a) more than 1 registered bank; or (b) no registered bank but ﬁxed establishments of more than 1 registered bank.
Notice or Commissioner’s appointment The reporting bank is— (a) the registered bank that ﬁrst notiﬁes the Commissioner of an election to be the reporting bank, if the Commis- sioner receives the notice within 6 months after the end of the income year in which the day occurs; or if paragraph (a) does not apply, the registered bank cho- sen by the Commissioner.
(b) Deﬁned in this Act: Commissioner, ﬁxed establishment, income year, New Zealand banking group, notice, registered bank, reporting bank Compare: 2004 No 35 s FG 8D Measuring ownership interests in companies FE 38 Measuring ownership interests in companies For the purposes of this subpart, a person’s ownership interest in a company is the total of the following percentages: (a) any direct ownership interests they hold in the com- pany; and any direct ownership interests held in the company by an associated person; and any indirect ownership interests they hold in the com- pany; and any indirect ownership interests held in the company by an associated person.
(b) (c) (d) Deﬁned in this Act: associated person, company Compare: 2004 No 35 s FG 2(2) FE 39 Direct ownership interests A person’s direct ownership interest in a company referred to in section FE 38 is equal to the highest percentage of shares or rights the person holds in the categories listed in section EX 1306 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FE 41 5(1) (Direct control interests), applying the subsection as if the company were a foreign company.
Deﬁned in this Act: company, control, foreign company, share Compare: 2004 No 35 s FG 2(3) FE 40 Tiered ownership interests (1) (2) (3) When this section applies This section applies when a person has a direct ownership in- terest in a company (company A), and that company has an ownership interest in another company (company B).
When ownership interest less than 50% If the person’s direct ownership interest in company A is less than 50%, they are treated as holding an indirect ownership in- terest in company B.

The interest is calculated by multiplying the percentage that is the person’s direct ownership interest in company A by the percentage that is company A’s ownership in company B.
When ownership interest more than 50% If the person’s direct ownership interest in company A is equal to or more than 50%, they are treated as holding an indirect ownership interest in company B that is equal to company A’s ownership interest in company B. Deﬁned in this Act: company Compare: 2004 No 35 s FG 2(4) FE 41 Treatment of associated persons’ interests (1) Aggregating ownership interests For the purposes of section FE 39, a person’s direct ownership interests include the direct ownership interests of a person as- sociated with them.
But if an aggregation of ownership inter- ests results in the same percentage shares or rights in a com- pany being counted more than once, the person’s ownership interest in the company must be adjusted to the extent neces- sary to avoid multiple counting.
(2) Relative resident in New Zealand For the purposes of sections FE 38 to FE 40, a non-resident who does not have a direct or an indirect ownership interest 1307 Part F s FF 1 Income Tax Act 2007 Reprinted as at 1 January 2010 in a company and a relative resident in New Zealand are not associated persons in relation to the company.
Deﬁned in this Act: associated person, company, New Zealand, non-resident, relative, resident in New Zealand, share Compare: 2004 No 35 s FG 2(4)–(6) Subpart FF—Interest apportionment for conduit investment [Repealed] Subpart FF: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Introductory provisions [Repealed] Heading: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

FF 1 What this subpart does [Repealed] Section FF 1: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
FF 2 When interest apportionment rule applies [Repealed] Section FF 2: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
FF 3 Steps required to determine treatment of excessive interest expenditure [Repealed] Section FF 3: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
1308 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FF 7 Interest apportionment rule [Repealed] Heading: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FF 4 Threshold for application of interest apportionment rule [Repealed] Section FF 4: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
FF 5 Determination of excess amount of interest expenditure of group [Repealed] Compare: 2004 No 35 s FH 5 Section FF 5: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
FF 6 Conduit tax relief [Repealed] Section FF 6: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section FF 6(3)(d): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
FF 7 Surplus to foreign dividends [Repealed] Section FF 7: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section FF 7(4)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Membership and debt percentages of foreign groups [Repealed] Heading: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1309 Part F s FF 8 Income Tax Act 2007 Reprinted as at 1 January 2010 FF 8 Identifying members of foreign groups [Repealed] Section FF 8: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
FF 9 Calculating debt percentage of New Zealand foreign groups [Repealed] Section FF 9: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
FF 10 Calculating debt percentage of consolidated foreign groups [Repealed] Section FF 10: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FF 11 Changes in foreign group membership [Repealed] Section FF 11: repealed (with effect on 30 June 2009), on 6 October 2009, by section 228(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Subpart FL—Emigration of resident companies FL 1 What this subpart does When this subpart applies This subpart applies when a company that is a New Zealand resident (the emigrating company) stops being a New Zealand resident.
Tax effects For tax purposes, the effects on an emigrating company and its shareholders, when an emigrating company becomes non- resident reﬂect the effects that would have resulted if,— immediately before the time of emigration,— (a) (1) (2) 1310 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FL 2 (i) (ii) (iii) the emigrating company disposed of its property at market value; and the emigrating company went into liquidation; and the amount available for distribution on liquid- ation were distributed as dividends to sharehold- ers of the emigrating company to the extent to which the amount is more than the available sub- scribed capital and any capital gain of the com- pany; and (b) at the time of emigration, the emigrating company were reformed as a foreign company with— (i) the same ownership and business activities as those of the emigrating company immediately before the time of emigration; and the property of the emigrating company immedi- ately before the time of emigration, acquired at its market value at that time.
(ii) Deﬁned in this Act: amount, available subscribed capital, business, company, dividend, emigrating company, foreign company, liquidation, market value, New Zealand resident, non-resident, shareholder, tax, time of emigration Compare: 2004 No 35 s FCB 1 FL 2 Treatment of emigrating companies and their shareholders (1) (2) When this section applies This section applies immediately before the time of emigration of an emigrating company.
Treatment of company The company is treated as— (a) disposing of its property to a person, and reacquiring the property from the person, for consideration equal to the market value of the property at the time; and (b) making a distribution in money as a dividend to its shareholders of an amount that would be available for distribution at the time if the company were treated as going into liquidation.
1311 Part F s FM 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Treatment of shareholder Each shareholder of the company is treated as being paid a dis- tribution in money as a dividend of the amount the shareholder would be entitled to at the time if the company were treated as going into liquidation.
Deﬁned in this Act: amount, dividend, emigrating company, liquidation, market value, pay, shareholder, time of emigration Compare: 2004 No 35 ss FCB 2, FCB 3 Subpart FM—Consolidated groups of companies Introductory provisions FM 1 What this subpart applies to This subpart applies to eligible companies that are part of a wholly-owned group of companies that choose to form a con- solidated group of companies.
Deﬁned in this Act: company, consolidated group, wholly-owned group Compare: 2004 No 35 s FD 1 FM 2 Consolidation rules (1) (2) Purpose The consolidation rules are intended to ensure that, unless a provision of this Act expressly provides otherwise or the con- text requires another result, this Act applies to companies that are part of a consolidated group as if they were a single com- pany, including its treatment for the following purposes: (a) to determine whether a tax credit may be used to satisfy the income tax liability of a consolidated group for a tax year: when a provision sets a limit or provides a threshold, and its application depends on whether or not something is more or less than the limit or threshold.
(b) Meaning The consolidation rules means the following: (a) (b) this subpart: section GB 38 (When sections GB 35 to GB 37 apply to consolidated groups): subpart ID (Use of tax losses by consolidated groups): (c) 1312 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 3 (f) (e) (d) sections LK 8 to LK 11 (which relate to tax credits of consolidated group companies): subpart OP (Memorandum accounts of consolidated groups): section RC 28 (Provisional tax rules and consolidated groups): section 74 of the Tax Administration Act 1994.
(g) Deﬁned in this Act: company, consolidated group, consolidation rules, income tax liability, tax credit, tax year Compare: 2004 No 35 ss FD 1, OB 1 consolidation rules Section FM 2(2)(g): substituted (with effect on 30 June 2009), on 6 October 2009, by section 229(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FM 3 Liability of consolidated groups and group companies (1) (2) (3) Taxable income of consolidated group For the purposes of calculating the income tax liability for a tax year of a consolidated group under subpart BC (Calculating and satisfying income tax liabilities), the taxable income of a consolidated group for a tax year is the sum of the amounts cal- culated under subsection (2) for each company in the consoli- dated group for all or part of the corresponding income year.
Calculation for each company in consolidated group Each company that is part of a consolidated group for all or part of an income year must calculate the amount that would be its taxable income under subpart BC, as modiﬁed by this section and sections FM 4 to FM 13, for all or part of the income year in which the company is part of the consolidated group.
Returns and assessment by consolidated group The nominated company of a consolidated group must— (a) provide a single return of income for a tax year for the companies in the consolidated group in the cor- responding income year under section 33 of the Tax Administration Act 1994; and (b) make an assessment under section 92 of the Tax Administration Act 1994 of the amount of income tax payable by the consolidated group.
1313 Part F s FM 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) (5) (6) (7) No separate returns or assessment (with exception) A group company cannot make a separate assessment or re- turn for the tax year unless it is, for part of the corresponding income year, not part of the consolidated group.
Joint and several liability Each company that is part of a consolidated group is jointly and severally liable for the amount of income tax assessed for the consolidated group in relation to its taxable income.
Individual liability The joint and several liability of each company that is part of a consolidated group is substituted for their individual income tax liability, but only to the extent— (a) of the income tax liability of the consolidated group for the period of the income year in which the company is in the consolidated group; and to which section FM 37 does not apply.
(b) Withholding and payment obligations of companies Each company that is part of a consolidated group is liable to comply with its obligations under the PAYE rules, the FBT rules, the ESCT rules, the RWT rules, and the NRWT rules.
Deﬁned in this Act: amount, assessment, company, consolidated group, corres- ponding income year, ESCT rules, FBT rules, income tax, income tax liability, income year, nominated company, NRWT rules, pay, PAYE rules, return of in- come, RWT rules, tax year, taxable income Compare: 2004 No 35 ss HB 1(1), HB 2(1), NB 1 FM 4 Limiting joint and several liability of group companies When this section applies This section applies before the nominated company of a consolidated group makes an assessment for the consolidated group for a tax year.
Named companies bearing liability Despite section FM 3(5), the nominated company may ask the Commissioner for approval for 1 or more named companies in the consolidated group to bear the consolidated group’s in- come tax liability for the tax year.
(1) (2) 1314 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 5 (3) (4) (5) Approval by Commissioner The Commissioner must approve a request under subsection (2) unless limiting the liability to the named companies will signiﬁcantly prejudice the recovery, or likely recovery, of the income tax liability of the consolidated group for the tax year.
Liability limited to named companies For a tax year to which an approval referred to in subsection (3) relates,— (a) only a named company is liable for the income tax li- ability of the consolidated group, and if more than 1 company is named, the liability is joint and several: section RC 28 (Provisional tax rules and consolidated groups) does not apply to impose on a company other than a named company joint and several liability for provisional tax payable by the consolidated group.
(b) (b) When named companies do not meet obligations Despite subsection (4), the joint and several liability of a group company other than a named company is not extinguished to the extent to which— (a) a named company does not meet their income tax liabil- ity under this section; and the Commissioner determines that the income tax liabil- ity of the consolidated group that is attributable to the taxable income of a company other than a named com- pany is to be recovered from the other company.
Deﬁned in this Act: assessment, Commissioner, company, consolidated group, income tax liability, nominated company, pay, provisional tax, tax year, taxable income Compare: 2004 No 35 s HB 1(3)–(5) FM 5 Liability when company leaves consolidated group (1) Company leaving consolidated group In an income year in which a company leaves a consolidated group, the company’s liability under section FM 3(5) is re- moved if all the following paragraphs apply: (a) if the assessment is made after the later of— (i) the date on which the company is treated as leav- ing the consolidated group; or 1315 Part F s FM 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) (ii) the date of the event that caused the company to be treated as leaving the consolidated group; and the amount assessed is more than an earlier assessment of the consolidated group for the income year; and the Commissioner considers that the removal of the li- ability will not signiﬁcantly prejudice the recovery, or likely recovery, of the amount of income tax assessed for the income year.
(2) Notifying company and consolidated group For the purposes of subsection (1)(c), the Commissioner must notify the company and the consolidated group if the discre- tion has been exercised.
Deﬁned in this Act: amount, assessment, Commissioner, company, consoli- dated group, income tax, income year, notify Compare: 2004 No 35 s HB 1(2) FM 6 Some general rules for treatment of consolidated groups References to income, tax losses, tax payable, and credits For the purposes of the consolidation rules, the following amounts are determined on the basis of a single assessment: (a) income, assessable income, net income, or taxable in- come of a consolidated group: a tax loss component, a tax loss, a loss balance, an at- tributed CFC net loss, or a FIF net loss of a consolidated group: tax payable by a consolidated group: a tax credit available to a consolidated group.
(b) (c) (d) Shares For the purposes of applying the consolidation rules to particu- lar provisions in this Act, the shares or options over shares of a consolidated group are treated as comprising all the shares or options over shares of the companies in the consolidated group at the relevant time.
Dividends A dividend that 1 company that is part of a consolidated group pays to another group company continues to be taken into ac- count for the purposes of— the imputation rules: (a) (1) (2) (3) 1316 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 6 (4) (5) (b) (c) (d) (e) [Repealed] sections FM 8(3)(c), FM 27 to FM 30, GB 38, GB 40, and OP 3 to OP 50 (which relate to dividends and con- solidated groups): subpart OE (Branch equivalent tax accounts (BETA)): section 74 of the Tax Administration Act 1994. International tax rules The international tax rules apply, modiﬁed as necessary, as if the consolidated group were a single company.
Balance of imputation credit account Sections OA 3 (General rules for maintaining memorandum accounts) and YA 2(7) (Meaning of income tax varied) apply for the purposes of section GB 38, subpart OP, and section 74 of the Tax Administration Act 1994 as if the references to the imputation rules were references to sections OP 3 to OP 50.
Deﬁned in this Act: amount, assessable income, assessment, attributed CFC net loss, company, consolidated group, consolidation rules, dividend, FIF net loss, imputation credit account, imputation rules, income, income tax, international tax rules, loss balance, net income, pay, share, tax, tax credit, tax loss, tax loss component, taxable income Compare: 2004 No 35 ss FD 2, FD 11 Section FM 6(3)(b): repealed (with effect on 30 June 2009), on 6 October 2009, by section 230(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FM 6(3)(c): substituted (with effect on 30 June 2009), on 6 October 2009, by section 230(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FM 6(3)(e): substituted (with effect on 30 June 2009), on 6 October 2009, by section 230(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FM 6(5) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 230(5) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

Section FM 6(5): substituted (with effect on 30 June 2009), on 6 October 2009, by section 230(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FM 6(5): amended (with effect on 1 April 2008), on 6 October 2009, by section 230(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FM 6 list of deﬁned terms FDP account: repealed (with effect on 30 June 2009), on 6 October 2009, by section 230(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1317 Part F s FM 7 Income Tax Act 2007 Reprinted as at 1 January 2010 Section FM 6 list of deﬁned terms FDP rules: repealed (with effect on 30 June 2009), on 6 October 2009, by section 230(6) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Calculating taxable income for consolidated group returns Accounting generally FM 7 Treatment of amounts derived or expenditure incurred Sections FM 8 to FM 30 set out the treatment of certain amounts derived or expenditure incurred while a company is part of a consolidated group.

The treatment applies to the part of a company’s income year when the company is in the con- solidated group.
Deﬁned in this Act: amount, company, consolidated group, income year Compare: 2004 No 35 s HB 2(1) FM 8 Transactions between group companies: income When this section applies This section applies when a company that is part of a consoli- dated group derives an amount of income from a transaction or arrangement with another company in the same consolidated group, and the amount would not be income if the consolidated group were 1 company.
Excluded income The amount is excluded income of the company under section CX 60 (Intra-group transactions).
(b) Exclusion of certain amounts Despite subsection (2), this section does not apply to— (a) an amount arising from the disposal of the company’s trading stock; or an amount arising under section EW 31 (Base price ad- justment formula) from— (i) the disposal of a ﬁnancial arrangement to which the ﬁnancial arrangements rules apply; or the remission of a ﬁnancial arrangement to which the ﬁnancial arrangements rules apply, if the par- (ii) (1) (2) (3) 1318 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 10 (c) ties were not group companies for the whole term of the arrangement; or a dividend under section CD 4(1) (Transfers of value generally) between group companies arising from the release of an obligation to repay money lent before the companies are treated under FM 35 as part of the con- solidated group.
Deﬁned in this Act: amount, arrangement, company, consolidated group, divi- dend, excluded income, ﬁnancial arrangement, ﬁnancial arrangements rules, in- come, money lent, pay, trading stock Compare: 2004 No 35 s HB 2(1)(a) FM 9 Amounts that are company’s income (1) When this section applies This section applies when a company that is part of a consoli- dated group derives an amount that would not be income of the company in the absence of this section, but would be income of the consolidated group if it were 1 company either— (a) because of a purpose for which an item of property was acquired; or because a connection exists between the amount and the carrying on of a business by another consolidated group company; or for some other reason.
(b) (c) (2) Income The amount is income of the company under section CV 2 (Consolidated groups: income of company in group).
Deﬁned in this Act: amount, business, company, consolidated group, income Compare: 2004 No 35 s HB 2(1)(e) FM 10 Expenditure: intra-group transactions (1) When this section applies This section applies when— (a) a company incurs expenditure or loss, or has an amount of depreciation loss, in a tax year or part of a tax year in which it is part of a consolidated group; and the company incurs the expenditure or loss through a payment or disposal to, or a transaction or arrangement with, another consolidated group company.
(b) 1319 Part F s FM 11 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) No deduction (with exception) If a deduction would not be allowed for the expenditure or loss if the consolidated group were 1 company, the company is denied a deduction under section DV 16 (Consolidated groups: intra-group transactions) unless the exceptions in section DV 16(2)(a) or (b) apply.
Deﬁned in this Act: amount, arrangement, company, consolidated group, de- duction, depreciation loss, loss, tax year Compare: 2004 No 35 s HB 2(1)(b) FM 11 Expenditure: nexus with income derivation When this section applies This section applies when a company incurs expenditure or loss or has an amount of depreciation loss in a tax year or part of a tax year in which it is part of a consolidated group that— is not expenditure or loss to which section FM 10 ap- (a) plies; and would not be allowed as a deduction to the company in the absence of this section.
(b) Deduction The company is allowed a deduction for the amount under sec- tion DV 17 (Consolidated groups: expenditure or loss incurred by group companies) if the consolidated group would be al- lowed a deduction for the amount, treating the group as if it were 1 company, because of a connection between— (a) the incurring of the expenditure or loss or amount of depreciation loss; and the deriving of assessable or excluded income, or the carrying on of a business by another company in the consolidated group.
(b) Deﬁned in this Act: amount, assessable income, business, company, consoli- dated group, deduction, depreciation loss, excluded income loss, tax year Compare: 2004 No 35 s HB 2(1)(c) (1) (2) 1320 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 13 FM 12 Expenditure when deduction would be denied to consolidated group (1) (2) When this section applies This section applies when a company incurs expenditure or loss or an amount of depreciation loss in a tax year or part of a tax year in which it is part of a consolidated group that— (a) is not expenditure or loss to which section FM 10 ap- plies; and would be allowed as a deduction to that company in the absence of this section.
(b) No deduction (with exception) The company is denied a deduction for an amount under sec- tion DV 17 (Consolidated groups: expenditure or loss incurred by group companies) if the deduction would be denied to the consolidated group, treating the group as if it were 1 company, except to the extent to which the expenditure or loss or amount of depreciation loss is interest on money that the company has borrowed from a person that is part of the consolidated group, and the company— (a) is allowed a deduction under section DB 7 (Interest: most companies need no nexus with income) or DB 8 (Interest: money borrowed to acquire shares in group companies): would be allowed a deduction under section DB 7 or DB 8 because the company is treated as having used the money borrowed, to the extent of the actual acqui- sition cost, to acquire certain shares when, through in- terposed intra-group borrowings, the money borrowed was in fact used by another group company in acquiring the shares.
(b) Deﬁned in this Act: amount, company, consolidated group, deduction, depre- ciation loss, interest, loss, share, tax year Compare: 2004 No 35 s HB 2(1)(d) FM 13 Capital expenditure (1) When this section applies This section applies when a company that is part of a consoli- dated group incurs expenditure or loss that would, treating the consolidated group as if it were 1 company, be taken into ac- 1321 Part F s FM 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) count in determining the cost of property but would not other- wise be taken into account in the absence of this section.
Amount taken into account The expenditure or loss is taken into account in determining the cost of property of companies in the consolidated group.

Deﬁned in this Act: company, consolidated group, loss Compare: 2004 No 35 s HB 2(2) FM 14 Part-year ﬁnancial statements When this section applies This section applies in an income year when— (a) a company joins or leaves a consolidated group during the income year; or a consolidated group is formed or ends its existence dur- ing the income year.
(b) Who must provide statements The following returns of income for the tax year must include part-year ﬁnancial statements under sections FM 38(5) and FM 40(4): (a) by the company when the ﬁnancial statements relate to a period in which the company is not in the consolidated group: by the consolidated group when the ﬁnancial statements relate to a period in which the company is in the consoli- dated group: by another consolidated group when the ﬁnancial state- ments relate to a period in which the company is in an- other consolidated group.
(b) (c) Detailed statements The part-year ﬁnancial statements must determine, as applic- able, the annual gross income, annual total deductions, income tax liability, or tax loss of the company in a fair and reasonable way.

For this purpose the relevant part of the income year is treated as a complete income year.
Deﬁned in this Act: annual gross income, annual total deduction, company, consolidated group, income tax liability, income year, return of income, tax loss, tax year Compare: 2004 No 35 s FD 9 (1) (2) (3) 1322 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 15 Accounting for particular property FM 15 Amortising property and revenue account property (1) When this section applies This section applies— (a) when property is transferred from a company (com- pany A) to another company (company B) and both companies are in the same consolidated group at the time the transfer takes place, and the property trans- ferred is— (i) (ii) amortising property; or revenue account property, but not trading stock or a ﬁnancial arrangement to which the ﬁnancial arrangements rules apply; and (b) to determine the income and deductions on a later disposal of property, or in relation to the depreciation or amortisation of the acquisition cost of the property under this Act.
(2) Acquisition by company B Company B is treated as acquiring the property on the date it was acquired by company A for the amount set out in subsec- tions (3) to (5).

Whole pool (3) When the property forms the whole of a pool of property that is depreciated by company A under sections EE 20 to EE 24 (which relate to depreciation loss calculated under the pool method), the amount in subsection (2) is the adjusted tax value of the pool immediately before the property is transferred to company B.
Part pool (4) When the property forms only part of a pool of property that is depreciated by company A under sections EE 20 to EE 24, the amount in subsection (2) is the lesser of— (a) the market value of the property transferred to company B; and the adjusted tax value of the whole of the pool immedi- ately before the property is transferred to company B.
(b) 1323 Part F s FM 15 Income Tax Act 2007 Reprinted as at 1 January 2010 Not pool property If subsections (3) and (4) do not apply, the amount in subsec- tion (2) is the sum of the following amounts of expenditure incurred by company A before the property is transferred to company B for which no deduction has been allowed other than by the depreciation or amortisation of the acquisition cost of the property under section EE 1, EZ 7, or EZ 8 (which relate to depreciation), or another amortisation provision of this Act: (a) (b) the original purchase price of the property: expenditure incurred— (i) (ii) in purchasing or improving the property; or in securing or improving company A’s legal rights to the property.
When subsection (7) applies Subsection (7) applies— (a) for the purposes of sections EE 46 to EE 52 (which relate to disposals and depreciation recovery income); and to property referred to in subsection (1)(b) other than pooled property; and in relation to an amount of depreciation loss or amort- isation of acquisition cost up to the time the property is transferred from company A to company B.
(b) (c) Pre-transfer deductions for depreciation loss and amortisation Company B is treated as allowed the pre-transfer deductions that company A is allowed for amounts of depreciation loss under section EZ 7 or EZ 8, or for an amount of expenditure or loss under another amortisation provision of this Act.
Deﬁned in this Act: acquire, adjusted tax value, amortising property, amount, company, consolidated group, deduction, depreciation loss, ﬁnancial arrange- ment, ﬁnancial arrangements rules, income, market value, other amortisation provision, pool, revenue account property, trading stock Compare: 2004 No 35 s FD 10(1), (2) (5) (6) (7) 1324 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 17 FM 16 Land or business: certain farming or forestry expenditure (1) (2) When this section applies This section applies in an income year when 2 companies (company A and company B) are in the same consolidated group for the whole of the income year, and — (a) company A transfers land to company B, and company B holds the land for the remainder of the income year; or company A stops carrying on a business, and company B carries on the business for the remainder of the in- come year.
(b) Deductions for certain farming and forestry expenditure Company A is allowed a deduction under sections DO 4 to DO 6, and DO 12 (which relate to farming and aquaculture expenditure), or DP 3 (Improvements to forestry land) after the transfer or cessation of the business as if the transfer or cessation did not occur.
Deﬁned in this Act: business, company, consolidated group, deduction, income year, land Compare: 2004 No 35 s FD 10(3) FM 17 Trading stock (1) When this section applies This section applies in an income year in which a company (company A) transfers identiﬁable trading stock to another company (company B) when— (a) company A and company B are in the same consoli- dated group at the time of the transfer; and company A and company B choose to value the trading stock under subpart EB (Valuation of trading stock (in- cluding dealer’s livestock)) or at the cost to company A, as applicable; and the nominated company of the consolidated group noti- ﬁes the Commissioner within the time for providing the consolidated group’s return of income, or a later time if the Commissioner agrees.
(b) (c) 1325 Part F s FM 18 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Trading stock held at start of income year If company A held the trading stock at the start of the income year, the consideration for the transfer is the value of the trad- ing stock at the start of the income year determined under sub- part EB.
Trading stock acquired If subsection (2) does not apply, the consideration for the trans- fer is the cost of the trading stock to company A. Deﬁned in this Act: Commissioner, company, consolidated group, income year, nominated company, notify, return of income, trading stock Compare: 2004 No 35 s FD 10(5) FM 18 Financial arrangements: transfer from company A to company B When this section applies This section applies in an income year in which a company (company A) transfers a ﬁnancial arrangement to which the ﬁnancial arrangements rules apply to another company (com- pany B) when— (a) company A and company B are in the same consoli- dated group for the whole of the income year; and the method of calculating income and expenditure from the ﬁnancial arrangement does not change after the transfer, and the consolidated group’s return of income is made on that basis; and neither company A nor company B is entitled to use under sections IA 4 and IA 5 (which relate to the use of loss balances by companies) a loss balance carried forward unless subpart ID (Use of tax losses by con- solidated groups) applies.
(b) (c) Treatment of companies In the year of transfer and in later income years,— (a) company A is treated as if it had never been a party to the ﬁnancial arrangement, and section EW 31 (Base price adjustment formula) does not apply: company B is treated as if it had taken all the actions that company A undertook before the transfer in enter- ing into the ﬁnancial arrangement, incurring expend- (b) (1) (2) 1326 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 19 (3) iture and deriving income, and providing its return of income in relation to the ﬁnancial arrangement.
Relationship with sections EW 38 and GB 21 This section overrides sections EW 38 (Consideration when disposal for no, or inadequate, consideration) and GB 21 (Dealing that defeats intention of ﬁnancial arrangements rules).
Deﬁned in this Act: company, consolidated group, ﬁnancial arrangement, ﬁnan- cial arrangements rules, income, income year, loss balance, return of income Compare: 2004 No 35 s FD 10(4), (4A) FM 19 Financial arrangements: transfer for fair and reasonable consideration (1) (2) (3) When this section applies This section applies in an income year in which a company (company A) transfers a ﬁnancial arrangement to another company (company B) when— (a) company A and company B are in the same consoli- dated group at the time of the transfer; and section FM 18 does not apply to the transfer; and the method of calculating income and expenditure from the ﬁnancial arrangement does not change after the transfer, and the consolidated group’s return is made on this basis.
(b) (c) Consideration for transfer In calculating the base price adjustment, company A’s consid- eration for the transfer is a fair and reasonable amount of the income that would have been derived, or the expenditure that would have been incurred, by company A in the year of trans- fer if the transfer had not taken place.
Relationship with sections EW 38 and GB 21 This section overrides sections EW 38 (Consideration when disposal for no, or inadequate, consideration) and GB 21 (Dealing that defeats intention of ﬁnancial arrangements rules).
Deﬁned in this Act: amount, company, consolidated group, ﬁnancial arrange- ment, income, income year, return of income Compare: 2004 No 35 s FD 10(4), (4B) 1327 Part F s FM 20 Income Tax Act 2007 Reprinted as at 1 January 2010 FM 20 Financial arrangements: transfer at market value (1) (2) (3) When this section applies This section applies in an income year in which a company (company A) transfers a ﬁnancial arrangement to another company (company B) when— (a) company A and company B are in the same consoli- dated group at the time of the transfer; and neither section FM 18 nor FM 19 applies to the transfer.
(b) Consideration for transfer The consideration for the transfer is the market value of the ﬁnancial arrangement on the date of the transfer.

Relationship with sections EW 38 and GB 21 This section overrides sections EW 38 (Consideration when disposal for no, or inadequate, consideration) and GB 21 (Dealing that defeats intention of ﬁnancial arrangements rules).
Deﬁned in this Act: company, consolidated group, ﬁnancial arrangement, in- come year Compare: 2004 No 35 s FD 10(4), (4C) FM 21 Property transfers when companies leave consolidated groups When this section applies This section applies to the extent to which a transfer of prop- erty has not previously been taken into account in the calcula- tion of a consolidated group’s taxable income under sections FM 8 to FM 13, or FM 15 to FM 20 and FM 23 when— (a) a company leaves a consolidated group, but not through liquidation; and the company holds property that has at any time been transferred between companies in the same consoli- dated group; and sections FM 15, or FM 17 to FM 20 applied to the transfer of the property.
(b) (c) Disposal and acquisition at market value The company is treated as disposing of the property immedi- ately before it leaves the consolidated group to a person not (1) (2) 1328 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 23 (3) associated with it, and reacquiring it at that time at its market value.
Market value at time of transfer If the item of property is part of or is absorbed into some other property, or its market value cannot be separately identiﬁed, the company is treated as disposing of and reacquiring the property at its market value at the time of the transfer under the relevant provision referred to in subsection (1)(c).

If the property is transferred more than once, the time of disposal and reacquisition is the date of the latest transfer at which its market value can be determined.
Deﬁned in this Act: associated person, company, consolidated group, liquid- ation, market value, taxable income Compare: 2004 No 35 s FD 10(6), (7) FM 22 Arrangements to avoid consolidation rules (1) (2) When this section applies This section applies when— (a) a company joins a consolidated group and at the time holds property that it later transfers to another group company; and sections FM 15 or FM 17 to FM 20 would otherwise apply to the transfer of the property; and after the transfer the company leaves the consolidated group, whether by liquidation or otherwise.
(b) (c) Arrangement to defeat consolidation rules If, in undertaking the activities, it could reasonably be con- cluded that the company was involved in an arrangement that had a purpose or effect of defeating the intent and applica- tion of the consolidation rules, the relevant provision does not apply to the transfer.
Deﬁned in this Act: arrangement, company, consolidated group, consolidation rules, liquidation Compare: 2004 No 35 s FD 10(9) FM 23 Arrangements for disposal of shares When this section applies This section applies when— (1) 1329 Part F s FM 23 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) (c) (d) 2 companies (company A and company B) are in the same consolidated group; and the value of company A’s net assets have been reduced as a result of a dividend, distribution, payment, arrange- ment, or transaction between company A and company B at the time the dividend is paid or the distribution, payment, arrangement, or transaction is made; and another company (company C) disposes of shares in company A for consideration that is less than the amount that would have been received in an arm’s length transaction had the reduction in the value of company A’s net assets not occurred; and if the disposal were by way of sale, the consideration from the sale would be included in company C’s in- come, other than income taken into account under sec- tion FM 3.
Arm’s length transaction on disposal of shares The disposal is treated as if it were a sale at arm’s length.

Income The amount that would have been received in an arm’s length transaction is income of company C under section CV 3 (Con- solidated groups: arrangement for disposal of shares).

Timing The time at which the consideration for the sale at arm’s length is determined is before the reduction in the value of company A’s net assets.
Relationship with sections FM 8 and FM 11 Subsection (2) does not apply to an amount of income taken into account under section FM 8 or FM 11.
Deﬁned in this Act: amount, arrangement, company, consolidated group, divi- dend, income, pay, share Compare: 2004 No 35 s FD 10(8) Treatment of foreign dividends [Repealed] Heading: repealed (with effect on 1 April 2009), on 6 October 2009, pursuant to section 231(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(2) (3) (4) (5) 1330 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 27 FM 24 General treatment of foreign dividends [Repealed] Section FM 24: repealed (with effect on 1 April 2009), on 6 October 2009, by section 231(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FM 25 Reduction in payments for foreign dividends [Repealed] Section FM 25: repealed (with effect on 1 April 2009), on 6 October 2009, by section 231(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

FM 26 Using tax losses to pay FDP [Repealed] Section FM 26: repealed (with effect on 1 April 2009), on 6 October 2009, by section 231(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FM 26(3)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

FM 27 Refunds of FDP (1) (2) When this section applies This section applies when a company becomes entitled in a tax year to a refund of a FDP paid by it to the Commissioner in an earlier tax year in relation to a foreign dividend received when the company was part of a consolidated group.
Maximum amount of refund The refund must not be more than the amount set out in the following paragraphs, as applicable: (a) if the consolidated group has an FDP account at the time the entitlement arises, a credit balance in the group’s FDP account at the end of the tax year that is before the tax year in which the entitlement arises; or if the consolidated group does not have an FDP account at the time the entitlement arises, a credit balance in the group’s imputation credit account at the end of the tax year that is before the tax year in which the entitlement arises.
(b) 1331 Part F s FM 28 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) (6) Treatment of excess If subsection (2) does not apply to some or all of the pay- ment because it is more than the applicable credit balance, the amount in excess is credited to FDP payable by the company for a tax year in which it is part of the consolidated group.
Earlier refunds of payments The credit balance referred to in subsection (3) is treated as re- duced by an earlier refund of FDP that is made in the tax year to the company or to another company in the same consoli- dated group at the time the dividend is paid or for the income year in which the refund is made.
Refunds of income tax Subsection (4) also applies in relation to a refund of income tax that is, under sections RM 13 to RM 17 (which relate to limit on refunds) no more than the credit balance described in subsection (2).

Relationship with section RM 18 This section overrides section RM 18 (Limits on refunds re- lated to foreign dividends).
However, section RM 18 does not limit a refund of FDP to a company that is part of a consoli- dated group at the time the dividend is paid to the extent to which this section would not have limited the refund.
Deﬁned in this Act: amount, Commissioner, company, consolidated group, FDP, FDP account, foreign dividend, imputation credit account, income tax, pay, tax year Compare: 2004 No 35 s NH 5(5), (6), (8) FM 28 Refund when consolidated group has loss When this section applies This section applies when— (a) a company has paid FDP to the Commissioner in an income year and, at the time the dividend was paid, the company was part of a consolidated group; and the group has a tax loss component for the tax year that corresponds to the income year that may be used under section IA 3 and subpart ID (which relate to the treat- ment of tax losses); and the nominated company of the consolidated group has ﬁled its return of income under section FM 3(3).
(b) (c) (1) 1332 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 29 (2) (3) (4) (5) Applying for refund The company may apply to the Commissioner for a refund of the payment.

The maximum refund is the smallest of the following amounts: (a) (b) the amount of the payment paid in the income year: the amount of the tax loss component multiplied by the rate set out in subsection (4)(b): the credit balance of the group’s FDP account at the end of the tax year just ended.
(c) Tax loss component reduced The amount of the tax loss component is reduced by an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) (b) amount of refund is the amount of the refund paid to the company: tax rate is the basic rate of income tax set out in sched- ule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) for the tax year that corresponds to the income year.
Relationship with section RM 21 This section overrides section RM 21 (Refunds when loss bal- ances used to reduce net income).

Deﬁned in this Act: amount, Commissioner, company, consolidated group, FDP, FDP account, foreign dividend, income tax, income year, nominated com- pany, pay, return of income, tax loss component, tax year Compare: 2004 No 35 s NH 5(7) Section FM 28(4)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
FM 29 Treatment of credit balance in consolidated group’s FDP account (1) When this section applies This section applies when a consolidated group has a credit balance in its FDP account at the end of a tax year.
1333 Part F s FM 30 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Credit and debit The nominated company of the consolidated group may choose that some or all of the credit balance becomes— (a) a credit in the imputation credit account of the group, or of the imputation group to which the consolidated group companies belong; and a debit in the FDP account of the consolidated group.
(b) How election made The company makes the election by recording the debit in the consolidated group’s FDP account.

Deﬁned in this Act: consolidated group, FDP account, imputation credit ac- count, imputation group, nominated company, tax year Compare: 2004 No 35 s NH 6(6) FM 30 Application of certain provisions to consolidated groups When subsections (2) and (3) apply Subsections (2) and (3) apply when a consolidated group has a policyholder credit account and an FDP account.
Credit and debit balances The nominated company of the consolidated group may choose to have some or all of a credit balance in the FDP ac- count credited to its policyholder credit account by recording the credit and corresponding debit in its accounts.
Section OC 20: life insurance credit balance Section OC 20 (FDPA transfer to policyholder credit account) applies in relation to a consolidated group, modiﬁed as neces- sary, as if— (a) a reference to a company were a reference to the con- solidated group: a reference to a provision of this Act applying to a com- pany were a reference to the equivalent of sections OA 2 to OA 4, OA 7, OA 8, OC 2, OC 21, OC 23(4), OC 28(7), OC 34(3), OP 1, OP 2, and OP 51 to OP 77 (which relate to FDP accounts) applying to a consoli- dated group.
(b) Section OC 27: FDP credits Section OC 27 (FDP credits attached to dividends) applies in relation to a consolidated group as if the reference to an (1) (2) (3) (4) 1334 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 30 FDPA company includes a reference to a company if, at the time a foreign dividend is paid to it, the company is part of a consolidated group that maintains an FDP account.
(5) (6) (7) Sections OC 30 to OC 32, and others: liability for payments and penalties Sections OA 2(5) and OC 30 to OC 32 (which relate to fur- ther FDP), and 103, 104, 139B, 140C, 140D, and 181 of the Tax Administration Act 1994 apply, modiﬁed as necessary in relation to a consolidated group and its FDP account as if— (a) (b) the group were a single company: a reference to a provision of this Act were a reference to the equivalent provision applying to a consolidated group: a reference to a liability of a company for further FDP, FDP penalty tax, and a late payment penalty were a reference to the joint and several liability for the pay- ment, tax, or penalty of each company that is part of the group at the time the payment, tax or penalty becomes payable.
(c) Section RA 19: amalgamations Section RA 19 (Refunds of excess amounts or when amounts mistakenly paid) applies, modiﬁed as necessary, from the time of amalgamation when a consolidated group ends its existence on a resident’s restricted amalgamation that involves all com- panies in the consolidated group, whether or not with a com- pany outside the consolidated group, in relation to tax paid by the consolidated group as if it and the amalgamated company were a single company.
Sections 30 and 68 of Tax Administration Act 1994: FDP accounts Sections 30 and 68 of the Tax Administration Act 1994 apply, modiﬁed as necessary, in relation to a consolidated group as if a reference to an FDPA company were a reference to a com- pany that is part of a consolidated group that maintains an FDP account.
Deﬁned in this Act: amalgamated company, amalgamation, company, consoli- dated group, FDP account, FDP penalty tax, FDPA company, foreign dividend, 1335 Part F s FM 31 Income Tax Act 2007 Reprinted as at 1 January 2010 further FDP, nominated company, pay, policyholder credit account, resident’s restricted amalgamation, tax Compare: 2004 No 35 ss NH 4(9), NH 6(1), (2), (5), (7) Membership of consolidated groups Eligibility and restrictions FM 31 Eligibility rules When company eligible A company is eligible to form, join, and continue as part of a consolidated group at a particular time if, at the time,— (a) (b) (c) it is resident in New Zealand; and it is not a foreign company; and it is not a company that derives only exempt income, except exempt income under sections CW 9 to CW 11 (which relate to income from equity); and it is incorporated in New Zealand or carrying on a busi- ness in New Zealand through a ﬁxed establishment; and it is not, by the law of another country or territory, li- able to income tax in that country or territory through domicile, residence, or place of incorporation; and when subsection (2) or (4) applies, it meets the relevant conditions; and subsections (5) and (6) do not apply to it.
(d) (e) (f) (g) Restriction when company of certain type Despite subsection (1), if a company that is part of a consoli- dated group is 1 of the following types of company, all com- panies in the consolidated group at the time must be the same type as that company: (a) (b) a qualifying company: a mining company.
Grandparented consolidated companies The requirements of subsection (1)(d) and (e) do not apply to determine whether a grandparented consolidated company— is eligible to form or join a consolidated group: (a) continues as part of the consolidated group.
(b) (1) (2) (3) 1336 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 32 (4) (5) (6) Non-standard balance date Despite subsection (1), if a company that is part of a con- solidated group has a non-standard balance date, all compan- ies in the consolidated group at the time must have the same non-standard balance date.

LAQCs A company is not eligible to be part of a consolidated group if it is an LAQC.
Anti-avoidance measure A company is not eligible to be part of a consolidated group if, for a purpose of enabling a company to be part of a consoli- dated group so as to defeat the intent and application of the consolidation rules, the company’s shares— (a) are subject to an arrangement, or to a series of related or connected arrangements; or have rights attaching to them extinguished or altered directly or indirectly by any means.
(b) Deﬁned in this Act: arrangement, business, company, consolidated group, con- solidation rules, exempt income, ﬁxed establishment, foreign company, grand- parented consolidated company, income, income tax, LAQC, mining company, New Zealand, non-standard balance date, qualifying company, resident in New Zealand, share Compare: 2004 No 35 ss FD 3(b)-(e), OB 1 eligible company Section FM 31(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 232(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FM 31(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 232(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FM 31 list of deﬁned terms income tax: inserted (with effect on 1 April 2008), on 6 October 2009, by section 232(3) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FM 32 Restriction on membership of consolidated groups A company is not eligible to be in more than 1 consolidated group at a particular time.
If circumstances arise in which a company would, apart from this section, be treated at a par- ticular time as in more than 1 consolidated group, then— (a) the company is treated as in the consolidated group of which it was ﬁrst part; or 1337 Part F s FM 33 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) if the company is in 2 or more consolidated groups sim- ultaneously, the Commissioner may specify its consoli- dated group, having regard to all the circumstances of the case.
Deﬁned in this Act: Commissioner, company, consolidated group Compare: 2004 No 35 s FD 5 FM 33 When membership is reduced A consolidated group continues to exist if the number of group companies is reduced to 1 company, but if the consolidated group has no company at any time, the consolidated group no longer exists.
Deﬁned in this Act: company, consolidated group Compare: 2004 No 35 s FD 8(9) Nominated companies FM 34 Nominated companies Group company at the time The nominated company of a consolidated group at any time must be in the consolidated group at the time.

Agent For the purposes of this Act and the Tax Administration Act 1994, a nominated company of a consolidated group is, at a time, the agent of the consolidated group and of each company that is in the consolidated group at the time.
Changing nominated company A nominated company may notify the Commissioner that it is, at a particular date, no longer to continue as the agent for the consolidated group, and that another company is to become the nominated company for the consolidated group.

When notice takes effect A notice referred to in subsection (3) takes effect— (a) (b) on the date the Commissioner receives the notice; or on a later date set out in the notice.
(1) (2) (3) (4) 1338 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 35 (5) Replacing nominated company If the nominated company of a consolidated group is liqui- dated, the other companies in the consolidated group may choose a replacement.
The replacement company— (a) becomes the nominated company of the consolidated group from the date of liquidation; and (b) must notify the Commissioner of its selection as nom- inated company within 20 working days after the date of liquidation, or a longer period if the Commissioner agrees.
Deﬁned in this Act: agent, Commissioner, company, consolidated group, li- quidation, nominated company, notice, notify, working day Compare: 2004 No 35 ss FD 6, FD 8(5) proviso Forming, joining, or leaving consolidated groups FM 35 Forming consolidated group (1) (2) (3) Election Two or more companies may choose to form a consolidated group of companies if the companies are, at the time,— a wholly-owned group of companies; and (a) eligible under section FM 31.
(b) Notifying Commissioner The Commissioner must be notiﬁed of an election under sub- section (1).

For the purposes of section FM 3(5), the notice must state that each company that is part of the consolidated group acknowledges their joint and several liability for the amount of income tax assessed for the consolidated group.

Nominated company A notice under subsection (2) must nominate 1 of the com- panies in the consolidated group as its agent.

The company is called the nominated company.
Deﬁned in this Act: agent, amount, assessment, Commissioner, company, con- solidated group, income tax, nominated company, notice, notify, wholly-owned group Compare: 2004 No 35 ss FD 3(a), FD 4(1), (2) 1339 Part F s FM 36 Income Tax Act 2007 Reprinted as at 1 January 2010 FM 36 Joining existing consolidated group (1) (2) (3) When this section applies This section applies when 2 or more companies have formed a consolidated group and the consolidated group has not ended its existence.
Eligible for and entitled to membership If a company is eligible under section FM 31 and entitled to join the consolidated group, it may choose to join the consoli- dated group by notifying the Commissioner.

Joint and several liability The company providing the notiﬁcation referred to in subsec- tion (2) must agree in the notice to be jointly and severally liable under section FM 3(5) for income tax payable by the consolidated group.
Deﬁned in this Act: Commissioner, company, consolidated group, income tax, notice, notify, pay Compare: 2004 No 35 s FD 7(1), (2) FM 37 Leaving consolidated group A company leaves a consolidated group if— (a) it chooses to leave the consolidated group and notiﬁes the Commissioner of its election, seesection FM 39; or it no longer meets the eligibility criteria set out in sec- tion FM 31, seesection FM 40; or when it is not a nominated company, it is no longer en- titled to be in the same consolidated group as the nom- inated company, seesection FM 40; or it is part of a consolidated group that no longer has a nominated company, seesection FM 41.
(b) (c) (d) Deﬁned in this Act: Commissioner, company, consolidated group, nominated company, notify Compare: 2004 No 35 s FD 8(1) When membership starts and stops FM 38 Notice requirements on forming or joining consolidated group When this section applies This section applies when— (1) 1340 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 38 (2) (3) (4) (5) (6) (a) (b) 2 or more companies choose to form a consolidated group under section FM 35; or a company chooses to join an existing consolidated group under section FM 36.
Condition Despite subsection (1), this section applies only if a company forming or joining a consolidated group remains entitled to be in the consolidated group either at the start of the relevant income year or for the notice period, as applicable.

Setting out income year in notice For a notice given to the Commissioner within the notice period in an income year, the company may provide that the election applies for the income year.
The company is treated as in the consolidated group from the start of the income year.

When notice does not specify income year If the notice referred to in subsection (3) does not specify an income year, the company is treated as in the consolidated group from the start of the income year following that in which the Commissioner receives the notice.
Setting out entitlement date in notice Despite subsections (3) and (4), if a company becomes eligible to join a consolidated group during an income year, and the notice is given to the Commissioner within the notice period, the company may provide that the election applies from the date they ﬁrst became entitled to make an election.

The com- pany is treated as in the consolidated group from that date, and part-year ﬁnancial statements under section FM 14 are re- quired.
Notice period In this section, notice period means 1 of the following: (a) (b) 63 working days after the start of an income year; or if the company joining, or the companies forming, the consolidated group in the income year are incorporated or formed in the same income year, 63 working days after the latest incorporation or formation; or if the company or companies become entitled to make an election during an income year, 63 working days from the date they ﬁrst became entitled; or (c) 1341 Part F s FM 39 Income Tax Act 2007 Reprinted as at 1 January 2010 (7) (d) an extended period if the Commissioner agrees that the notice could not reasonably have been provided within the 63-day period.
Anti-avoidance measure Subsection (5) does not apply if it would be reasonable to conclude that an arrangement has been entered into for a pur- pose of enabling the company to meet the requirements of the subsection so as to defeat the intent and application of the con- solidation rules.
Deﬁned in this Act: arrangement, Commissioner, company, consolidated group, consolidation rules, income year, notice, notice period, working day Compare: 2004 No 35 ss FD 4(3)–(8), FD 7(3)–(8) FM 39 Choosing to leave consolidated group (1) When this section applies This section applies when a company chooses to leave a con- solidated group and notiﬁes the Commissioner of its election.
Deferring leaving date (2) When the company notiﬁes the Commissioner of its election, it may defer the date on which it leaves the consolidated group to the ﬁrst day of the next income year.

However, unless sub- sections (3) and (4) apply, if the company does not defer the leaving date, it is treated as no longer in the consolidated group from the start of the income year in which the Commissioner receives the notice.
First income year: deferral Despite subsection (2), if a company leaves a consolidated group in the same income year in which it joins the group, and defers the leaving date in the notice, it is treated as leaving the consolidated group from the start of the income year after the income year in which the Commissioner receives the notice.

Sections FM 40 and 41 override this subsection.


First income year: no deferral Despite subsection (2), if a company leaves a consolidated group in the same income year in which it joins the consoli- dated group, and does not defer the leaving date in the notice, (3) (4) 1342 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FM 40 it is treated as leaving the consolidated group on the date it joined the group.
Deﬁned in this Act: Commissioner, company, consolidated group, income year, notice, notify Compare: 2004 No 35 s FD 8(2) FM 40 Losing eligibility or entitlement to be part of consolidated group (1) (2) (3) (4) When this section applies This section applies when a company is no longer eligible to be part of a consolidated group or, if it is not the nominated company, when it is no longer entitled to be in the same con- solidated group as the nominated company.
Effective date Unless subsections (3) or (4) apply, the company is treated as leaving the consolidated group from the start of the income year in which the relevant event occurs, making it no longer— eligible to be part of the consolidated group; or (a) if it is not the nominated company, entitled to be in the (b) same consolidated group as the nominated company.
First income year Despite subsection (2), if a company becomes no longer eli- gible or entitled to be in the consolidated group in the same income year in which it joined the group, the company is treated as leaving the consolidated group on the day it joined the group.

Notifying date Despite subsections (2) and (3), the company may notify the Commissioner that it is leaving the consolidated group from the date on which its eligibility or its entitlement ended.
For the notice to be effective, the company must— (a) provide the notice within 20 working days after the date on which the company’s eligibility or entitlement ended, although the Commissioner may agree to extend this period if it is reasonable to do so in the circum- stances; and provide part-year ﬁnancial statements under section FM 14.
(b) 1343 Part F s FM 41 Income Tax Act 2007 Reprinted as at 1 January 2010 (5) Anti-avoidance measure A notice under this section is not valid if it is made in connec- tion with an arrangement entered into for a purpose of enabling the company to leave a consolidated group so as to defeat the intent and application of the consolidation rules.

When this subsection applies, the company is treated as leaving the con- solidated group on the date on which its eligibility or entitle- ment ended.
Deﬁned in this Act: arrangement, Commissioner, company, consolidated group, consolidation rules, income year, nominated company, notice, notify, working day Compare: 2004 No 35 s FD 8(3), (4), (6), (7) FM 41 No nominated company If, during an income year, no nominated company exists for a consolidated group and no company that is part of the con- solidated group is notiﬁed as a replacement under section FM 34(3), all companies in the consolidated group are treated as having left the consolidated group with effect from the start of the income year.
Section FM 34(5) overrides this section.

Deﬁned in this Act: company, consolidated group, income year, nominated company, notify Compare: 2004 No 35 s FD 8(5) FM 42 When company liquidated If a company is no longer part of a consolidated group because it has been liquidated,— (a) the company is not treated as leaving the consolidated group from the start of the income year of the liquid- ation under sections FM 39 and FM 40: part-year ﬁnancial statements are not required under section FM 40(4)(b).
(b) Deﬁned in this Act: company, consolidated group, income year, liquidation Compare: 2004 No 35 s FD 8(8) 1344 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FN 3 Subpart FN—Imputation groups of companies FN 1 When this subpart applies This subpart applies when 2 or more companies that are part of a wholly-owned group of companies form an imputation group to enable a company in the imputation group to pay an imputed dividend when another company in the imputation group has a credit for New Zealand tax paid.
Deﬁned in this Act: company, dividend, imputation group, New Zealand tax, pay, wholly-owned group of companies FN 2 Imputation rules The imputation rules means the following: (a) (b) (c) this subpart: section CD 15 (Tax credits linked to dividends): sections GB 34 to GB 37 (which relate to tax avoidance and imputation): subparts LE and LF, and sections LO 1 to LO 3 (which relate to tax credits): subpart OB (Imputation credit accounts (ICA)): sections OP 1 to OP 50 (which relate to imputation credits and consolidated groups): subpart OZ (Terminating provisions): sections RM 13 to RM 17, RM 32, and RZ 6 (which relate to limits on refunds): section YA 2(7)(b) (Meaning of income tax varied): sections 29, 64, 67, 69, 70, 78D, 97, 101, 139B, 140B, 140D(1) and (2), and 180 of the Tax Administration Act 1994.
(d) (e) (f) (g) (h) (i) (j) Deﬁned in this Act: imputation rules Compare: 2004 No 35 s OB 1 imputation rules Section FN 2(i): amended (with effect on 1 April 2008), on 6 October 2009, by section 233 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
FN 3 Liabilities of companies in imputation group A company that is part of an imputation group is jointly and severally liable for further income tax, civil penalties, and in- terest under Part 7 of the Tax Administration Act 1994 arising 1345 Part F s FN 4 Income Tax Act 2007 Reprinted as at 1 January 2010 from the operation of the imputation credit account of the im- putation group.
Deﬁned in this Act: company, further income tax, imputation credit account, imputation group Compare: 2004 No 35 s FDA 4 FN 4 Eligibility rules When company eligible A company is eligible to be part of an imputation group at a particular time if, at the time,— (a) it is resident in New Zealand or resident in Australia; and it is part of the same wholly-owned group of companies; and it is not treated under a double tax agreement as resident in a country other than New Zealand or Australia, as applicable, for the purposes of taxation in the relevant country; and it is required to maintain an imputation credit account under section OB 1 (General rules for companies with imputation credit accounts), or chooses to maintain an account under OB 2 (Australian companies with imput- ation credit accounts); and if it is a company that is part of a consolidated group, it meets the criteria set out in subsection (2); and if it is a qualifying company or a mining company, it meets the condition set out in subsection (3); and subsections (4) and (5) do not apply to it.
(b) (c) (d) (e) (f) (g) Consolidated group companies A company that is part of a consolidated group is eligible to be part of an imputation group at a particular time if, at the time,— (a) all companies in the consolidated group meet the cri- teria set out in subsection (1) and are part of the imput- ation group; and for an imputation group that includes or will include companies from more than 1 consolidated group, the companies in the consolidated groups are part of a sin- gle wholly-owned group of companies from the earliest (b) (1) (2) 1346 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FN 5 (3) (4) (5) date on which a credit arose and remains uncancelled in the imputation credit account of a consolidated group or an imputation group, all of whose members are, or would be, in the imputation group.
Restriction when company of certain type Despite subsections (1) and (2), if a company that is part of an imputation group is 1 of the following types of company, all companies in the imputation group at the time must be the same type as that company: (a) (b) a qualifying company; or a mining company.

LAQCs A company is not eligible to be part of an imputation group if it is an LAQC.
Anti-avoidance measure A company is not eligible to be part of an imputation group if, for a purpose of enabling a company to be part of an im- putation group so as to defeat the intent and application of the imputation rules, the company’s shares— (a) are subject to an arrangement or to a series of related or connected arrangements; or have rights attaching to them extinguished or altered, either directly or indirectly, by any means.
(b) Deﬁned in this Act: arrangement, company, consolidated group, double tax agreement, imputation credit account, imputation group, imputation rules, LAQC, mining company, New Zealand, qualifying company, resident in Australia, resident in New Zealand, wholly-owned group Compare: 2004 No 35 s FDA 1 FN 5 Imputation groups with reduced numbers An imputation group continues to exist if the number of group companies is reduced to 1 company, but if an imputation group has no company at any time, the imputation group no longer exists.
Deﬁned in this Act: company, imputation group Compare: 2004 No 35 s FDA 3(2), (4) 1347 Part F s FN 6 Income Tax Act 2007 Reprinted as at 1 January 2010 FN 6 Nominated companies Group company at the time The nominated company of an imputation group at any time must be part of the imputation group at the time.
Trans-Tasman imputation groups For a trans-Tasman imputation group, the nominated com- pany— (a) must not be an Australian imputation credit account (b) (ICA) company: is the nominated company for the resident imputation subgroup associated with the trans-Tasman imputation group.

Agent For the purposes of the imputation rules, a nominated company is, at a time, the agent of the imputation group and of each company that is part of the imputation group at the time.
Changing nominated company A nominated company may notify the Commissioner that it is, at a particular date, no longer to continue as the agent for the imputation group, and that another company is to become the nominated company.

When notice takes effect A notice under subsection (4) has effect 30 days after the date on which the Commissioner receives it.
Replacing nominated company If a nominated company of an imputation group is liquidated, the other companies in the imputation group may choose a replacement.

The replacement company— (a) becomes the nominated company from the date of the liquidation, on complying with paragraph (b); and (b) must notify the Commissioner of its selection as nom- inated company within 30 days after the date of the li- quidation, or by a later date if the Commissioner agrees.
Deﬁned in this Act: agent, Australian ICA company, Commissioner, company, imputation group, liquidation, nominated company, notice, notify, resident im- putation subgroup, trans-Tasman imputation group Compare: 2004 No 35 ss FDA 5, FDA 6(6) (1) (2) (3) (4) (5) (6) 1348 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FN 8 FN 7 Forming imputation groups (1) (2) (3) (4) (5) Election Two or more companies may choose to form an imputation group of companies if the companies are, at the time,— a wholly-owned group of companies; and (a) eligible under section FN 4.
(b) Notifying Commissioner The Commissioner must be notiﬁed of an election under sub- section (1).

Nominated company A notice under subsection (2) must nominate 1 of the com- panies in the imputation group as its agent for the purposes of the imputation rules.

In this subpart, the company is called the nominated company.
Consolidated group companies A nominated company of a consolidated group may notify the Commissioner that, having met the eligibility criteria in sec- tion FN 4, all the group companies have chosen— (a) to form an imputation group with eligible companies that are not part of the consolidated group; or to join an existing imputation group.

(b) Effective date A notice under subsection (1) or (4) has effect from the start of the tax year in which the Commissioner receives the notice.
Deﬁned in this Act: agent, Commissioner, company, consolidated group, im- putation group, imputation rules, nominated company, notice, notify, tax year, wholly-owned group Compare: 2004 No 35 s FDA 2 FN 8 Trans-Tasman imputation groups and resident imputation subgroups (1) Trans-Tasman imputation group If at least 1 company in an imputation group is an Australian ICA company, and at least 1 company in the imputation group is not an Australian ICA company, the imputation group is a trans-Tasman imputation group.
1349 Part F s FN 9 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Resident imputation subgroup A company in a trans-Tasman imputation group that is not an Australian ICA company is treated as a resident imputation subgroup of the trans-Tasman imputation group and is associ- ated with that group.

Single company A resident imputation subgroup continues while a company in the trans-Tasman imputation group that is not an Australian ICA company remains in existence.
Deﬁned in this Act: Australian ICA company, Commissioner, company, im- putation group, notify, resident imputation subgroup, trans-Tasman imputation group Compare: 2004 No 35 ss FDA 3(1), (3), OB 1 resident imputation subgroup, trans-Tasman imputation group Section FN 8(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 234(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FN 8(3) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 234(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section FN 8(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 234(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
FN 9 Joining existing imputation group Generally A company that is eligible under section FN 4(1) may join an imputation group by notifying the Commissioner.

Consolidated groups If the companies part of a consolidated group are eligible under section FN 4(2), the nominated company of the consolidated group may notify the Commissioner that all the companies in the consolidated group are to join an imputation group.
Joint and several liability The companies referred to in subsections (1) and (2) must agree in the notice to be jointly and severally liable under sec- tion FN 3 for any further income tax, civil penalties, and in- terest under Part 7 of the Tax Administration Act 1994 arising from the operation of the imputation credit account of the im- putation group.
(1) (2) (3) 1350 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FN 11 (4) Effective date A notice under subsection (1) has effect from the start of the tax year in which the Commissioner receives the notice.
Deﬁned in this Act: Commissioner, company, consolidated group, further in- come tax, imputation credit account, imputation group, nominated company, notice, notify, tax year Compare: 2004 No 35 ss FDA 2(1)–(3), (5), FDA 4 FN 10 When membership of imputation group ends A company stops being part of an imputation group if— (a) the company chooses to leave the imputation group and notiﬁes the Commissioner, see section FN 11; or the company no longer meets the eligibility criteria set out in section FN 4, see section FN 12; or the company is not a nominated company and is no longer entitled to be part of the same imputation group as the nominated company, see section FN 12; or the company is in an imputation group that no longer has a nominated company, see section FN 13.
(b) (c) (d) Deﬁned in this Act: Commissioner, company, imputation group, nominated company, notify Compare: 2004 No 35 s FDA 6(1) FN 11 Company choosing to leave imputation group (1) When this section applies This section applies when a company chooses to leave an im- putation group and notiﬁes the Commissioner of its election.
Effective date (2) When the company notiﬁes the Commissioner of its election, it may set out in the notice a date from which it is no longer to be treated as part of the imputation group.

However, unless subsection (3) applies, if the company does not set out a date in the notice, it is treated as no longer part of the imputation group from the start of the tax year in which the Commissioner receives the notice.
(3) First tax year Despite subsection (2), if a company leaves an imputation group in the same tax year in which it joined the imputation group, it is treated as leaving the imputation group on the date 1351 Part F s FN 12 Income Tax Act 2007 Reprinted as at 1 January 2010 when it became part of the imputation group, and not from the start of the tax year.
Deﬁned in this Act: Commissioner, company, imputation group, notice, notify, tax year Compare: 2004 No 35 s FDA 6(2) FN 12 Company no longer eligible or entitled to membership When this section applies This section applies when a company is no longer eligible to be part of an imputation group or, if it is not the nominated company, when it is no longer entitled to be part of the same imputation group as the nominated company.
Effective date Unless subsections (3) or (4) apply, the company is treated as no longer part of the imputation group from the start of the tax year in which the relevant event occurs, making it no longer— (a) (b) eligible to be part of the imputation group; or if it is not the nominated company, entitled to be part of the same imputation group as the nominated company.
Notifying date Despite subsection (2), the company may notify the Commis- sioner that it is no longer to be treated as part of the imputation group from the date on which its eligibility or its entitlement ended.

The company must provide the notice within 30 days after the date on which the company’s eligibility or entitle- ment ended, although the Commissioner may agree to extend this period if it is reasonable to do so in the circumstances.
First tax year Despite subsections (2) and (3), if a company leaves an imput- ation group in the same tax year in which it became part of the imputation group, the company is treated as leaving the group on the date when it became part of the imputation group, and not at the start of the tax year.
Anti-avoidance measure A notice under this section is not valid if it is made in connec- tion with an arrangement entered into for a purpose of enabling the company to leave an imputation group so as to defeat the intent and application of the imputation rules.

When this sub- (1) (2) (3) (4) (5) 1352 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FO 2 section applies, the company is treated as leaving the imput- ation group on the date on which its eligibility or entitlement ended.
Deﬁned in this Act: arrangement, Commissioner, company, imputation group, imputation rules, nominated company, notice, notify, tax year Compare: 2004 No 35 s FDA 6(3), (4), (7), (8) FN 13 Imputation group with no nominated company If, during a tax year, no nominated company exists for an im- putation group and no replacement is made under section FN 6(6), all companies in the imputation group are treated as hav- ing left the imputation group with effect from the start of the tax year.
Deﬁned in this Act: company, imputation group, nominated company, tax year Compare: 2004 No 35 s FDA 6(5) FN 14 Effect of liquidation of company If a company is no longer part of an imputation group because it is liquidated, sections FN 11 and FN 12 do not apply to treat the company as leaving the imputation group from the start of the income year in which the liquidation occurred.
Deﬁned in this Act: company, imputation group, income year, liquidation Compare: 2004 No 35 s FDA 6(9) Subpart FO—Amalgamation of companies Introductory provisions FO 1 What this subpart does This subpart sets out the rules that provide for some tax con- sequences when companies amalgamate.

In general, the rules provide roll-over relief when a resident’s restricted amalgam- ation occurs.
Deﬁned in this Act: amalgamation, company, resident’s restricted amalgam- ation, tax Compare: 2004 No 35 s FE 1(1)(a), (b) FO 2 Amalgamation rules The amalgamation rules means the following: (a) this subpart: 1353 Part F s FO 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) (d) (e) (f) (g) sections CD 35, CD 43(23) and (24), and CD 44(8) (which relate to the treatment of dividends): sections DB 8(3) to (5), DV 14 and DV 15 (which relate to the treatment of deductions when an amalgamating company ends its existence on a resident’s restricted amalgamation): sections IA 9, IE 2 to IE 5, and IQ 1 (which relate to tax losses): sections LK 12 to LK 15 (which relate to tax credits): sections OA 9, OB 24, OB 53 (which relate to memo- randum accounts): sections RA 20, RC 33, RD 46, and RD 49 (which relate to tax payments): sections 75 and 76 of the Tax Administration Act 1994.
(h) Deﬁned in this Act: amalgamation rules Compare: 2004 No 35 s FE 1(2) FO 3 Resident’s restricted amalgamations What is a resident’s restricted amalgamation?
In the amalgamation rules, an amalgamation is a resident’s restricted amalgamation if, at the time of the amalgamation, each of the amalgamating companies and the amalgamated company— (a) (b) is resident in New Zealand; and is not treated under, and for the purposes of, a double tax agreement as resident in another country; and is not a company that derives only exempt income, ex- cept income exempt under sections CW 9 to CW 11 (which relate to income from equity); and if the amalgamated company is a qualifying company, it meets the condition in subsection (2); and if the amalgamated company is a loss-attributing quali- fying company (LAQC), it meets the condition in sub- section (3).
(c) (d) (e) Qualifying companies If the amalgamated company is a qualifying company immedi- ately after the amalgamation, each of the amalgamating com- panies must be a qualifying company at the time of the amal- gamation.

(1) (2) 1354 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FO 4 (3) (4) (5) LAQCs If the amalgamated company is an LAQC immediately after the amalgamation, each of the amalgamating companies must be an LAQC at the time of the amalgamation.
Companies deriving exempt income For the purposes of subsection (1)(c), a company that derives only exempt income includes a local authority that is not a council-controlled organisation.

Companies opting out Even if they meet the requirements of subsection (1), the companies may choose that the amalgamation will not be treated as a resident’s restricted amalgamation by notifying the Commissioner in the way set out in section 75 of the Tax Administration Act 1994.
Deﬁned in this Act: amalgamated company, amalgamating company, amalgam- ation, amalgamation rules, Commissioner, company, council-controlled organ- isation, double tax agreement, exempt income, LAQC, local authority, New Zealand, notify, qualifying company, resident in New Zealand, resident’s re- stricted amalgamation Compare: 2004 No 35 s OB 1 qualifying amalgamation FO 4 Rights and obligations of amalgamated companies (1) (2) When this section applies This section applies when an amalgamating company ends its existence on amalgamation.
Amalgamated company assuming rights, obligations, and liabilities For the tax year corresponding to the income year of amal- gamation and all earlier tax years, the amalgamated company, under section 209G of the Companies Act 1955 or section 225 of the Companies Act 1993,— (a) must comply with the obligations of the amalgamating company under the Inland Revenue Acts; and (b) must meet the liabilities of the amalgamating company (c) under the Inland Revenue Acts; and is entitled to the rights, powers, and privileges of the amalgamating company under the Inland Revenue Acts.
1355 Part F s FO 5 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Relationship with Companies Act 1993 The amalgamation rules apply despite anything to the contrary in section 225(d) of the Companies Act 1993.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, amalgamation rules, income year, Inland Revenue Acts, tax year Compare: 2004 No 35 ss FE 1(1)(c), FE 8 FO 5 Amalgamations and remitted liabilities Sections CG 2 (Remitted amounts) and DB 47 (Payments for remitted amounts) do not apply merely because an amal- gamated company succeeds to a liability of an amalgamating company on an amalgamation.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, amount Compare: 2004 No 35 s FE 9 Treatment of shares, income, expenditure, and bad debts FO 6 Cancellation of shares If an amalgamating company (company A) holds shares in another amalgamating company (company B), and the shares are cancelled on the amalgamation, company A is treated as having disposed of the shares in company B immediately be- fore the amalgamation for an amount equal to the cost of the shares to company A. Deﬁned in this Act: amalgamating company, amalgamation, cancellation, share Compare: 2004 No 35 s FE 2 FO 7 Income derived after amalgamation When this section applies This section applies when an amalgamating company ends its existence on amalgamation, and an amount is derived by the amalgamated company after the amalgamation as a result of something that the amalgamating company did or did not do.
Income of amalgamated company The amount is income of the amalgamated company under section CV 4 (Amalgamated companies: amount derived after (1) (2) 1356 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FO 9 amalgamation) if it would have been income of the amalgam- ating company but for the amalgamation.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, amount, income Compare: 2004 No 35 s FE 4(b) FO 8 Bad debts and expenditure or loss on resident’s restricted amalgamation (1) (2) When this section applies This section applies when an amalgamating company ends its existence on a resident’s restricted amalgamation, and the amalgamated company at any time— (a) writes off as bad the amount of a debt that it acquires from the amalgamating company at the time of the amalgamation; or incurs an amount of expenditure or loss, including an amount of depreciation loss, as a result of something that the amalgamating company did or did not do.
(b) Deduction of amalgamated company The amalgamated company is allowed a deduction under sec- tion DV 15(2) (Amalgamated companies: property passing on resident’s restricted amalgamation) for the amount if— (a) the amalgamating company would have been allowed the deduction but for the amalgamation; and the amalgamated company is not otherwise allowed the deduction.
(b) Deﬁned in this Act: amalgamated company, amalgamating company, amount, deduction, depreciation loss, loss, resident’s restricted amalgamation Compare: 2004 No 35 s FE 3 FO 9 Unexpired portion of prepaid expenditure If an amalgamating company ends its existence on amalgam- ation, the unexpired portion under section EA 3 (Prepayments) of an amount of expenditure of the amalgamating company for the income year of amalgamation is treated as the amalga- mated company’s unexpired amount of the expenditure.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, amount, income year, prepaid expenditure Compare: 2004 No 35 s FE 4(a) 1357 Part F s FO 10 Income Tax Act 2007 Reprinted as at 1 January 2010 Property passing to amalgamated company on amalgamation FO 10 When property passes on resident’s restricted amalgamation When this section applies This section applies when property belonging to an amalgam- ating company becomes the property of the amalgamated com- pany on a resident’s restricted amalgamation.
What this section does not apply to Despite subsection (1), this section— (a) (b) does not apply to property that is a ﬁnancial arrange- ment, seesections FO 12 to FO 15: is subject to the rules for— (i) (ii) amortising property in section FO 16: land in section FO 17.

Property passing The amalgamating company is treated as having disposed of the property immediately before the amalgamation.
The pass- ing of ownership is treated as a disposal of the property by the amalgamating company and an acquisition of the property by the amalgamated company.
Timing and consideration Unless subsections (5) or (6) apply, the amalgamated company is treated as having acquired the property on the date on which the amalgamating company acquired it for an amount that is the sum of— (a) (b) the price paid for the property; and any expenditure incurred in buying or improving the property; and any expenditure incurred in securing or improving the amalgamating company’s legal rights to the property.
(c) Trading stock If the property is trading stock for both the amalgamating com- pany and the amalgamated company, the consideration for the disposal and acquisition is taken as the value of the trading stock to the amalgamating company determined under subpart EB (Valuation of trading stock (including dealer’s livestock)) at the time of the amalgamation.
(1) (2) (3) (4) (5) 1358 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FO 11 (6) (7) Revenue account property If the property is revenue account property of the amalgamat- ing company but not revenue account property of the amalga- mated company, the consideration for the disposal and acqui- sition is taken as the market value of the property at the time of the amalgamation.
But this subsection does not apply to land that is revenue account property merely because of the 10-year rule in sections CB 9 to CB 11 and CB 14 (which relate to the disposal of land), in which case section FO 17(3) may apply.
Depreciation loss An amalgamating company is allowed a deduction under sec- tion DV 15(3) (Amalgamated companies: property passing on resident’s restricted amalgamation) for an amount of depreci- ation loss for property transferred to the amalgamated com- pany for the period beginning on the ﬁrst day of the income year of amalgamation and ending on the day before the date of the amalgamation.
Deﬁned in this Act: amalgamated company, amalgamating company, amortis- ing property, amount, deduction, ﬁnancial arrangement, income year, land, mar- ket value, resident’s restricted amalgamation, revenue account property, trading stock Compare: 2004 No 35 ss FE 6(1)–(3B), FE 6A FO 11 When property passes on amalgamation other than resident’s restricted amalgamation (1) Disposal and acquisition If property belonging to an amalgamating company becomes the property of the amalgamated company on an amalgam- ation that is not a resident’s restricted amalgamation,— (a) the amalgamating company is treated as having dis- posed of the property for an amount equal to the market value of the property at the time of the amalgamation; and the amalgamated company is treated as having acquired the property at that market value.
(b) (2) Relationship with section EE 41 Section EE 41 (Transfer of depreciable property on certain amalgamations on or after 14 May 2002) overrides this sec- 1359 Part F s FO 12 Income Tax Act 2007 Reprinted as at 1 January 2010 tion for the purposes of determining the cost of an item to an amalgamated company, unless the context requires otherwise.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, amount, market value, resident’s restricted amalgamation Compare: 2004 No 35 s FE 5 FO 12 Financial arrangements: resident’s restricted amalgamation, companies in wholly-owned group When this section applies This section applies, despite sections EW 42 and GB 21 (which relate to non-market transfers of ﬁnancial arrange- ments) in an income year in which the obligations that an amalgamating company has under a ﬁnancial arrangement pass to the amalgamated company on a resident’s restricted amalgamation when,— (a) the ﬁnancial arrangements rules apply to the ﬁnancial arrangement; and for the whole of the income year before the amalgam- ation, the amalgamating company and the amalgamated company were part of the same wholly-owned group of companies; and the method of calculating income and expenditure from the ﬁnancial arrangement does not change after the amalgamation, and the amalgamated company’s return of income for the corresponding tax year is made on this basis; and sections IA 3 to IA 6 and subpart ID (which relate to tax losses of companies and consolidated groups) do not apply to allow the amalgamating company to carry a loss balance forward from an earlier tax year for use in the tax year corresponding to the income year unless section IE 2 (Treatment of tax losses by amalgamating company) applies when the tax losses are those of the consolidated group.
(b) (c) (d) Amalgamated company’s election The amalgamated company may choose to apply subsections (3) and (4) in their return of income for the corresponding tax year.

(1) (2) 1360 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FO 13 (3) (4) Treatment of amalgamating company The amalgamating company is treated as if it had never been party to the ﬁnancial arrangement.
Section EW 31 (Base price adjustment formula) does not apply, in relation to the transfer of the ﬁnancial arrangement or the obligations under it.

the date the company entered into the arrangement; and the consideration paid; and the income derived; and the expenditure incurred; and the returns of income provided.
Treatment of amalgamated company The amalgamated company is treated as if it had taken the place of the amalgamating company in relation to the ﬁnancial arrangement in terms of— (a) (b) (c) (d) (e) Deﬁned in this Act: amalgamated company, amalgamating company, consider- ation, consolidated group, corresponding income year, ﬁnancial arrangement, ﬁnancial arrangements rules, income, income year, loss balance, resident’s re- stricted amalgamation, return of income, tax loss, tax year, wholly-owned group of companies Compare: 2004 No 35 ss FE 6(5), (6), FE 7(1)(a), (2) FO 13 Financial arrangements: resident’s restricted amalgamation, calculation method unchanged (1) When this section applies This section applies, despite sections EW 42 and GB 21 (which relate to non-market transfers of ﬁnancial arrange- ments) in an income year in which the obligations that an amalgamating company has under a ﬁnancial arrangement pass to the amalgamated company on a resident’s restricted amalgamation when— (a) the method of calculating income and expenditure from the ﬁnancial arrangement does not change after the amalgamation; and section FO 12 does not apply.
(b) (2) Calculating base price adjustment The amalgamating company is treated as having disposed of the ﬁnancial arrangement.

In calculating the base price adjust- ment, the consideration is the amount that would fairly and rea- sonably represent the income or expenditure that the amalgam- 1361 Part F s FO 14 Income Tax Act 2007 Reprinted as at 1 January 2010 ating company would have derived or would have incurred in the income year if the amalgamation had not taken place.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, consideration, dispose, ﬁnancial arrangement, income, income year, resident’s restricted amalgamation Compare: 2004 No 35 ss FE 6(5), (7), FE 7(1)(b), (3) FO 14 Financial arrangements: resident’s restricted amalgamation, other cases (1) (2) When this section applies This section applies in an income year in which a ﬁnancial ar- rangement belonging to an amalgamating company passes to the amalgamated company on a resident’s restricted amalgam- ation when sections FO 12 and FO 13 do not apply.
Market value The amalgamating company is treated as having disposed of the ﬁnancial arrangement.

The consideration for the disposal is the market value of the ﬁnancial arrangement on the date the amalgamated company acquires it.
Deﬁned in this Act: amalgamated company, amalgamating company, consid- eration, ﬁnancial arrangement, income year, market value, resident’s restricted amalgamation Compare: 2004 No 35 ss FE 6(5), (8), FE 7(1)(b), (4) FO 15 Financial arrangements: amalgamation other than resident’s restricted amalgamation When this section applies This section applies when an obligation that an amalgamating company has in relation to a ﬁnancial arrangement passes to the amalgamated company on an amalgamation that is not a resident’s restricted amalgamation.
Market value for amalgamating company The amalgamating company is treated as having disposed of the ﬁnancial arrangement or relieved itself of the obligations immediately before the amalgamation.

The consideration for the disposal is the market price for assuming the obligations at the time of the amalgamation.
(1) (2) 1362 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FO 16 (3) Market value for amalgamated company The amalgamated company is treated as having acquired the ﬁnancial arrangement or assumed the obligations immediately after the amalgamation.

The consideration for the acquisition is the market value of the property at the time of the amalgam- ation.
Deﬁned in this Act: amalgamated company, amalgamating company, amalgam- ation, consideration, ﬁnancial arrangement, market value, resident’s restricted amalgamation Compare: 2004 No 35 s FE 5 FO 16 Amortising property (1) When this section applies This section applies in an income year in which amortising property belonging to an amalgamating company passes to the amalgamated company on a resident’s restricted amalgam- ation.
The passing of ownership is treated as a disposal of the property by the amalgamating company and an acquisition by the amalgamated company.

Treatment of amalgamating company (1B) The amalgamating company is treated as neither deriving in- come nor having a deduction under sections EE 24 to EE 53 (which relate to disposals of depreciable property) as a result of the deemed disposal.
(2) (3) Value: all pool property If the amortising property forms the whole of a pool of prop- erty of the amalgamating company that is depreciated under sections EE 20 to EE 24 (which relate to depreciation under the pool method), the consideration for the disposal and ac- quisition is taken as the adjusted tax value of the pool imme- diately before the amalgamation.
Value: part pool property If the amortising property forms part of a pool of property of the amalgamating company that is depreciated under sections EE 20 to EE 24, the consideration for the disposal and acqui- sition is taken as the lesser of— (a) (b) the market value of the property; or the adjusted tax value of the pool immediately before the amalgamation.
1363 Part F s FO 17 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Deductions for depreciation loss If the amortising property is other than pool property of the amalgamating company, the amalgamated company is treated as having been allowed the deduction that the amalgamating company would have had for an amount of depreciation loss, or a deduction under any other amortisation provision of this Act, relating to the property.
Deﬁned in this Act: acquire, adjusted tax value, amalgamated company, amal- gamating company, amortising property, amount, deduction, depreciation loss, dispose, income year, market value, other amortisation provision, pool, resi- dent’s restricted amalgamation Compare: 2004 No 35 s FE 6(1), (4) Section FO 16(1B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 235(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section FO 16(1B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 235(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

FO 17 Land When this section applies This section applies when land belonging to an amalgamating company passes to the amalgamated company on a resident’s restricted amalgamation.
Disposal at market value If the land is not revenue account property of the amalgamat- ing company, but the disposal of the land would give rise to income for the amalgamated company under any of sections CB 6 to CB 14 (which relate to the disposal of land), the amal- gamating company is treated as having disposed of the land to the amalgamated company at the market value of the land at the date of the amalgamation.
Disposal of land within 10-year period If the land is, or may be, revenue account property of the amal- gamating company because of the 10-year rule in any of sec- tions CB 9 to CB 11 and CB 14, and the amalgamated com- pany disposes of the land within the 10-year period after the amalgamating company acquired it, an amount derived from (1) (2) (3) 1364 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FO 18 the disposal is income of the amalgamated company under whichever is applicable of sections CB 6 to CB 14.
Deﬁned in this Act: amalgamated company, amalgamating company, amount, income, land, resident’s restricted amalgamation, revenue account property Compare: 2004 No 35 s FE 6(3A), (3B) Treatment of ﬁnancial arrangements between amalgamating companies FO 18 When amalgamating companies are parties to ﬁnancial arrangement (1) (2) (3) (4) When this section applies This section applies when amalgamating companies are par- ties to a ﬁnancial arrangement that exists on the date of the amalgamation of the companies.
Financial arrangement discharged The ﬁnancial arrangement is, for the purposes of section EW 31 (Base price adjustment formula), treated as having been discharged immediately before the amalgamation.
The con- sideration for the discharge is,— (a) on a resident’s restricted amalgamation, the amalgam- ating company’s outstanding accrued balance for the ﬁ- nancial arrangement, seesection FO 19; or on an amalgamation other than a resident’s restricted amalgamation or when the borrowing company is in- solvent, the market value of the ﬁnancial arrangement on the date of the amalgamation.
(b) Amounts remitted An amount outstanding under a ﬁnancial arrangement is not regarded as remitted merely because it is treated as discharged under subsection (2).

However, for these purposes, an amalga- mated company is treated as having remitted an amount equal to the excess over market value of the outstanding accrued bal- ance for the ﬁnancial arrangement, seesection FO 20.
When borrower insolvent If an amalgamating company that is the borrower under the arrangement is insolvent and is unlikely to be able to meet its obligations under the arrangement, the company is treated as having paid to the other party to the arrangement in consider- 1365 Part F s FO 19 Income Tax Act 2007 Reprinted as at 1 January 2010 ation for the discharge an amount that is the market value of the ﬁnancial arrangement on the date of the amalgamation.
A company is treated as insolvent if it does not meet the solvency test in section 4 in the Companies Act 1993.

This subsection overrides subsection (2)(b).
Deﬁned in this Act: amalgamated company, amalgamating company, amalgam- ation, amount, company, consideration, ﬁnancial arrangement, market value, resident’s restricted amalgamation Compare: 2004 No 35 s FE 10(1)–(5), (6)(c) FO 19 Calculation of outstanding accrued balance: consideration for discharge Formula In section FO 18(2)(a), the outstanding accrued balance is cal- culated using the formula— consideration + prior expenditure + expenditure accrued in year − income accrued in year − consideration paid.
Deﬁnition of items in formula In the formula,— (a) (b) (c) consideration is the consideration paid to the amal- gamating company under the ﬁnancial arrangement: prior expenditure is the expenditure that the amal- gamating company incurs less the income that it de- rives from the ﬁnancial arrangement calculated under either a spreading method or EW 53 (Adjustment re- quired) in all income years other than the current in- come year from the time the ﬁnancial arrangement was entered into: expenditure accrued in year is the expenditure that the amalgamating company accrues from the ﬁnancial arrangement for the period from the ﬁrst day of the in- come year in which the amalgamation occurs to the date of the amalgamation, calculated either— (i) if the amalgamating company was party to the ﬁnancial arrangement in an earlier income year, using the spreading method it used to calculate income and expenditure under the ﬁnancial ar- rangement in the income year; or (1) (2) 1366 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FO 20 (ii) using a spreading method that the amalgamating company chooses, if the method could have been used if the income year had ended immediately before the amalgamation: income accrued in year is the income that the amal- gamating company accrues from the ﬁnancial arrange- ment for the period described in paragraph (c) and cal- culated as described in that paragraph: consideration paid is the consideration that the amal- gamating company pays for the ﬁnancial arrangement before the date of the amalgamation.
(d) (e) Deﬁned in this Act: amalgamating company, amalgamation, consideration, ﬁ- nancial arrangement, income, income year, pay, spreading method Compare: 2004 No 35 s FE 10(6)(a) FO 20 Calculation of outstanding accrued balance: amounts remitted Formula In section FO 18(3), the outstanding accrued balance is calcu- lated using the formula— consideration + prior income + income accrued in year − expenditure accrued in year − consideration paid.
(1) (2) Deﬁnition of items in formula In the formula,— (a) (b) (c) consideration is the consideration paid by the party under the ﬁnancial arrangement: prior income is the income that the party derives less the expenditure that it incurs under the ﬁnancial ar- rangement calculated under either a spreading method or section EW 53 (Adjustment required) in all income years other than the current income year from the time the ﬁnancial arrangement was entered into: income accrued in year is the income that the party ac- crues from the ﬁnancial arrangement for the period from the ﬁrst day of the income year in which the amalgam- ation occurs to the date of the amalgamation, calculated either— (i) using the spreading method used to calculate income and expenditure under the ﬁnancial ar- 1367 Part F s FZ 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) rangement in the income year, if the party was a party to the ﬁnancial arrangement in an earlier income year; or using a spreading method that the party chooses, if the method could have been used if the income year had ended immediately before the amalgam- ation: (d) (e) expenditure accrued in year is the expenditure that the party accrues under the ﬁnancial arrangement for the period described in paragraph (c) and calculated as described in that paragraph: consideration paid is the consideration paid to the party under the ﬁnancial arrangement before the date of the amalgamation.
Deﬁned in this Act: amalgamation, consideration, ﬁnancial arrangement, in- come, income year, spreading method Compare: 2004 No 35 s FE 10(6)(b) Subpart FZ—Terminating provisions Debentures FZ 1 Treatment of interest payable under debentures issued before certain date When this section applies This section applies for the purposes of section FA 2 (Rechar- acterisation of certain debentures).
Proﬁt-related debentures A debenture issued before 8pm New Zealand standard time on 23 October 1986 is a proﬁt-related debenture if the rate of interest may be determined by reference to the dividend payable by the company issuing the debenture or in any other manner.

Fixed rates of interest Section FA 2(2) applies to a proﬁt-related debenture issued before 8pm New Zealand standard time on 23 October 1986.
Deﬁned in this Act: company, debentures, dividend, interest, pay, proﬁt-related debenture Compare: 2004 No 35 s FC 1 (1) (2) (3) 1368 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FZ 2 Section FZ 1(3): amended (with effect on 1 April 2008), on 6 October 2009, by section 236 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
FZ 2 Effect of speciﬁed lease on lessor and lessee Leases (1) (2) (3) (4) (5) Lease treated as sale The leasing of a personal property lease asset under a speci- ﬁed lease is treated as a sale of the asset, made at the start of the term of the lease, by the lessor to the lessee.

The lessee is treated as having incurred, through the sale, capital expend- iture of an amount equal to the cost price of the asset.
Loan applied to ﬁnance acquisition of asset A lessor under a speciﬁed lease is treated as having advanced to the lessee a loan of an amount equal to the cost price of the personal property lease asset.

The lessee is treated as having applied the loan in the ﬁnancing of the acquisition of the asset.

No deduction A lessor under a speciﬁed lease is denied a deduction under section DZ 14(2) (Deductions under speciﬁed leases) for an amount of depreciation loss for the personal property lease asset.
Asset sold to lessor At the end of the term of a speciﬁed lease, if the personal property lease asset is not acquired by the lessee under the terms of the lease or in the exercise of an option under the lease, the asset is treated as sold at the end of the term of the lease to the lessor for— (a) an amount equal to the guaranteed residual value, if any, set out for the asset in the lease; or if no guaranteed residual value is set out in the lease, no consideration.
(b) Treatment when lease terminated If a speciﬁed lease is terminated before the term of the lease ends, whether by cancellation, surrender, or otherwise,— (a) the personal property lease asset relating to the lease is treated as sold on the date of the termination to the lessor by the lessee at a price equal to the amount by which the 1369 Part F s FZ 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) amount of the outstanding balance, at the time of ter- mination, of a loan advance by the lessor to the lessee is more than the amount or the sum of the amounts payable by the lessee to the lessor in consideration for the re- lease by the lessor of the lessee from the obligations of the lessee under the lease: despite paragraph (a), if, in relation to the amount of the outstanding balance and the amount or the sum of the amounts payable by the lessee to the lessor, no excess arises, the asset is treated as having been sold for no consideration: if the value of the consideration payable by the lessee to the lessor in relation to the termination is more than the amount of the outstanding balance, at the time of ter- mination, of a loan advanced by the lessor to the lessee, an amount equal to the amount of the excess is treated as income derived by the lessor in the income year in which the lease is terminated.
Subsequent sale, assignment, or lease If, on or after the end of the term of a speciﬁed lease, the per- sonal property lease asset relating to the lease is sold, assigned, or leased under a speciﬁed lease by the lessor to another per- son, and the value of the consideration on the sale, assignment, or lease— (a) is more than the amount determined for the ﬁrst speci- ﬁed lease under subsection (4), the amount determined is increased by a further amount that is equal to the part, if any, of the excess paid by the lessor to the lessee: is less than the amount determined for the ﬁrst speci- ﬁed lease under subsection (4)(a), and the lessee is re- quired to make a further payment to the lessor equal to the difference between the guaranteed residual value for the lease value, and the value of the consideration, the amount determined is reduced by the amount of the fur- ther payment.
(b) Consideration more than amount determined under subsection (4) Despite subsection (6), if the value of the consideration on the sale, assignment, or lease is more than the amount deter- (6) (7) 1370 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FZ 2 (8) (9) (10) mined under subsection (4), the part, if any, of the excess that is not paid to the lessee is treated as income under section CZ 20 (Disposal of personal property lease asset under speciﬁed lease).
Associated persons If the lessee under a speciﬁed lease, or another person who is associated with the lessee, at any time acquires the personal property lease asset, and disposes of the asset, and the value of the consideration for the disposal is more than the value of the consideration for which the lessee or other person acquired it, an amount equal to the excess is income under section CZ 20.
Meaning of outstanding balance In this section, and in section FZ 3, outstanding balance means the amount calculated using the formula— (loans advanced + interest payable) − instalments.
Deﬁnition of items in formula In the formula,— (a) loans advanced is the total amount of all loans ad- vanced under the lease by the lessor for the period— starting on the date that the lease started; and (i) ending on the date immediately before the start (ii) of the instalment period: (b) (c) interest payable is the total amount of interest payable for each loan for the period— (i) (ii) starting on the date that the lease started; and ending on the date immediately before the start of the instalment period: instalments is the total amount of all instalments paid by the lessee in the period— (i) (ii) starting on the date that the lease started; and ending on the date immediately before the start of the instalment period.
Deﬁned in this Act: amount, associated person, cost price, deduction, depreci- ation loss, guaranteed residual value, income, income year, instalment, lessee, lessor, loan, outstanding balance, pay, personal property lease asset, speciﬁed lease, term of the lease Compare: 2004 No 35 s FC 6(2)–(8) 1371 Part F s FZ 3 Income Tax Act 2007 Reprinted as at 1 January 2010 FZ 3 Income of lessor under speciﬁed lease Interest The income of a lessor derived under a speciﬁed lease is treated as interest.
Treatment of amount derived The amount of interest derived under subsection (1) is treated as— (a) during the term of the lease, derived during the initial period and each instalment period, an amount that is calculated either,— (i) (ii) on the outstanding balance for the initial period, and each instalment period, at such a rate and in such a manner that the aggregate of all of the amounts so calculated is equal to the amount ﬁrst mentioned in paragraph (b); or for the initial period and each instalment period, under such other method commonly applied in commercial usage as, having regard to the term of the lease and to the frequency of the personal property lease payments, results in the allocation to that initial period and to each instalment period of an amount that is fair and reasonable and re- sults in the sum of all amounts so allocated being equal to the amount ﬁrst mentioned in paragraph (b): (b) in relation to the term of the lease, an amount that is equal to the sum of the personal property lease pay- ments under the speciﬁed lease and the amount of the guaranteed residual value, if any, under the speciﬁed lease, reduced by the cost price of the personal prop- erty lease asset.
Calculation for income year The interest derived by a lessor is, for an income year, treated as an amount equal to the sum of the amounts calculated under subsection (2)(a) as calculated for the initial period, if any, and each instalment period that ends in the income year.
Some deﬁnitions In this section,— (1) (2) (3) (4) 1372 Reprinted as at 1 January 2010 Income Tax Act 2007 Part F s FZ 5 initial period means the period— (a) (b) starting on the date of the start of a lease; and ending just before the start of the instalment period that follows the start of the lease instalment period means the period— (a) starting on the day on which an instalment is payable; and ending with the day just before the day on which the next instalment is payable.
(b) Deﬁned in this Act: amount, guaranteed residual value, income, income year, initial period, instalment, instalment period, interest, lessor, outstanding bal- ance, pay, personal property lease asset, personal property lease payment, spe- ciﬁed lease, term of the lease Compare: 2004 No 35 s FC 7 FZ 4 Deductions under speciﬁed leases A lessee under a speciﬁed lease is denied a deduction for ex- penditure incurred by them under the lease except to the ex- tent described in section DZ 14(3) (Deductions under speciﬁed leases).
Deﬁned in this Act: deduction, lessee, speciﬁed lease Compare: 2004 No 35 s FC 8 Relationship property FZ 5 Commercial bills (1) (2) When this section applies This section applies for the purposes of section CZ 6 (Com- mercial bills before 31 July 1986) when a commercial bill is transferred under a settlement of relationship property.
Transfer at cost The transfer is treated as a disposal by the transferor and an acquisition by the transferee for an amount that equals the cost of the bill to the transferor.
Deﬁned in this Act: amount, commercial bill, settlement of relationship prop- erty Compare: 2004 No 35 s FF 5 1373 Part F s FZ 6 Income Tax Act 2007 Reprinted as at 1 January 2010 FZ 6 Transitional valuation rule for estate property Estate property What this section applies to This section applies to property transferred under section FC 1(1)(a) (What this subpart does) either on a person’s death or on a distribution by an executor, administrator, or trustee of an estate, if— (a) the death or distribution occurred before 1 October 2005; and in the tax year in which the property passes, all bene- ﬁciaries of the deceased person are resident in New Zealand, and no income of a beneﬁciary is exempt in- come under section CW 43 (Charitable bequests).
(b) Market value or value under settlement of relationship property The valuation of the transferred property for tax purposes for the corresponding income year in which the death or distribu- tion occurred is measured as a transfer occurring immediately before the death of the person, or at the date of distribution, as applicable, at— (a) market value; or (b) a value under subpart FB (Transfers of relationship property) for property of the type; or a value under subsection (4).
(c) Returns of income For the purposes of providing a return of income for the deceased person, beneﬁciary, and estate, a value determined under subsection (2) is treated as correct.

Requirements of other provisions Despite subsection (3), if this Act, the Income Tax Act 2004, or Income Tax Act 1994, requires the use of a market value for an item of property, that value must be used in the return of income.
Deﬁned in this Act: corresponding income year, exempt income, income, mar- ket value, New Zealand, property, resident in New Zealand, return of income, tax year, trustee Compare: 2004 No 35 ss FI 9, FI 10 (1) (2) (3) (4) 1374 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GA 1 Part G Avoidance and non-market transactions Subpart GA—Avoidance: general GA 1 Commissioner’s power to adjust (1) (2) (3) When this section applies This section applies if an arrangement is void under section BG 1 (Tax avoidance).
Commissioner’s general power The Commissioner may adjust the taxable income of a person affected by the arrangement in a way the Commissioner thinks appropriate, in order to counteract a tax advantage obtained by the person from or under the arrangement.

Commissioner’s speciﬁc power over tax credits The Commissioner may— (a) disallow some or all of a tax credit of a person affected by the arrangement; or allow another person to beneﬁt from some or all of the tax credit.
(b) Commissioner’s identiﬁcation of hypothetical situation (4) When applying subsections (2) and (3), the Commissioner may have regard to 1 or more of the amounts listed in sub- section (5) which, in the Commissioner’s opinion, had the ar- rangement not occurred, the person— (a) (b) (c) might be expected to have had.
would have had; or would in all likelihood have had; or (5) Reconstructed amounts The amounts referred to in subsection (4) are— an amount of income of the person: (a) an amount of deduction of the person: (b) an amount of tax loss of the person: (c) an amount of tax credit of the person.
(d) No double counting (6) When applying subsection (2), if the Commissioner includes an amount of income or deduction in calculating the taxable income of the person, it must not be included in calculating the taxable income of another person.
1375 Part G s GA 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (7) Meaning of tax credit In this section, tax credit means a reduction in the tax a person must pay because of— (a) a credit allowed for a payment by the person of an amount of tax or of another item; or another type of beneﬁt.
(b) Deﬁned in this Act: amount, arrangement, Commissioner, deduction, tax, tax credit, tax loss, taxable income Compare: 2004 No 35 s GB 1(1)–(2C) GA 2 Commissioner’s power to adjust: fringe beneﬁt tax (1) (2) When this section applies This section applies if— (a) an arrangement is void under section BG 1 (Tax avoid- ance); and the arrangement fringe beneﬁt tax (FBT).
involves altering the incidence of (b) Commissioner’s power in relation to excluded income The Commissioner may adjust the excluded income under sec- tion CX 3 (Excluded income) of a person affected by the ar- rangement in a way the Commissioner thinks appropriate, in order to counteract a tax advantage obtained by the person from or under the arrangement.
Commissioner’s identiﬁcation of hypothetical situation (3) When applying subsection (2), the Commissioner may have regard to 1 or more of the amounts listed in subsection (4) which, in the Commissioner’s opinion, had the arrangement not occurred, the person— would have had; or (a) would in all likelihood have had; or (b) (c) might be expected to have had.
Reconstructed amounts The amounts referred to in subsection (3) are— (a) (b) an amount of excluded income of the person: an amount of excluded income of the person, if the per- son had been allowed the beneﬁt of an amount of ex- cluded income derived by another person as a result of the arrangement.
(4) 1376 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 1 (5) No double counting If the Commissioner includes an amount of excluded income in calculating the taxable income of the person, it must not be included in calculating the taxable income of another person.
Deﬁned in this Act: amount, arrangement, Commissioner, excluded income, FBT, fringe beneﬁt tax, taxable income Compare: 2004 No 35 s GC 17B Subpart GB—Avoidance: speciﬁc Arrangements involving dividend stripping GB 1 Arrangements involving dividend stripping (1) (2) (3) When this section applies This section applies when— (a) (b) (c) a person disposes of shares in a company in an income year; and the disposal is part of a tax avoidance arrangement; and some or all of the consideration that the person derives from the disposal is in substitution for a dividend in an income year.
When amount substitutes for dividend An amount derived by the person is in substitution for a divi- dend if it is equivalent to or substitutes for a dividend that, but for the arrangement, the person— would have derived; or (a) would in all likelihood have derived; or (b) (c) might be expected to have derived.

Substitute treated as dividend The amount derived in substitution for a dividend is treated as a dividend derived by the person in the income year in which the disposal occurs.
Deﬁned in this Act: arrangement, company, dispose, dividend, income year, tax avoidance arrangement Compare: 2004 No 35 s GB 1(3) 1377 Part G s GB 2 Income Tax Act 2007 Reprinted as at 1 January 2010 Arrangements involving transfer pricing GB 2 Arrangements involving transfer pricing (1) When this section applies This section applies in relation to a person if an arrangement has a purpose or effect of defeating the intent and application of— (a) (b) section GC 7 (Excess amount payable by person): section GC 8 (Insufﬁcient amount receivable by per- son): section GC 9 (Compensating arrangement: person pay- ing less than arm’s length amount): section GC 10 (Compensating arrangement: person re- ceiving more than arm’s length amount).
(c) (d) Possible examples (2) Without limiting the generality of subsection (1), the following collateral arrangements may result in that purpose or effect: (a) a collateral arrangement with an associated person who is a non-resident: a market-sharing arrangement: an arrangement not to enter a market: a back-to-back supply arrangement: an income-sharing arrangement.
(b) (c) (d) (e) (3) Application of sections GC 7 to GC 10 Section GC 7, GC 8, GC 9, or GC 10, as applicable, applies to require the substitution of an arm’s length amount of con- sideration, despite section GC 6(2) and (3) (Purpose of rules and nature of arrangements).
Deﬁned in this Act: arrangement, associated person, non-resident Compare: 2004 No 35 s GC 1 Arrangements involving tax losses GB 3 Arrangements for carrying forward loss balances: companies When this section applies This section applies when— (a) a share in a company (the loss company) or another company has been subject to an arrangement, includ- (1) 1378 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 4 (b) (c) ing an arrangement directly or indirectly altering rights attached to the shares; and the arrangement allows the loss company to meet the re- quirements of section IA 5 (Restrictions on companies’ loss balances carried forward); and a purpose of the arrangement is to defeat the intent and application of sections IA 5 and IP 3 (Continuity breach: tax loss components of companies carried forward).
(2) Company treated as not meeting requirements The loss company is treated as not meeting the requirements of section IA 5 in relation to the share.
Deﬁned in this Act: arrangement, company, loss balance, share Compare: 2004 No 35 s GC 2 GB 4 Arrangements for grouping tax losses: companies (1) (2) When this section applies This section applies when— (a) a share in a company (the offset company) or another company has been subject to an arrangement, including an arrangement directly or indirectly altering rights at- tached to the shares; and the arrangement allows the offset company to meet the requirements of subparts IC and IP, and section IZ 7 (which relate to the use of tax losses by group compan- ies), as applicable; and a purpose of the arrangement is to defeat the intent and application of those provisions.
(b) (c) Company treated as not meeting requirements The offset company is treated as not meeting the requirements of subparts IC and IP and section IZ 7, as applicable, in relation to the share.
Deﬁned in this Act: arrangement, company, share, tax loss Compare: 2004 No 35 s GC 4 1379 Part G s GB 5 Income Tax Act 2007 Reprinted as at 1 January 2010 Arrangements to defeat continuity provisions GB 5 Arrangements involving trust beneﬁciaries (1) (2) (3) When this section applies This section applies when— (a) a share in a company or option over a share in a com- pany is held by a trustee; and a change occurs in the beneﬁciaries of the trust; and a purpose or effect of the change is to defeat the intent and application of a continuity provision.
(b) (c) Trustee treated as disposing of share or option The trustee is treated as having disposed of the share or option to an unrelated person at the time of the change in beneﬁciar- ies, and as having reacquired it immediately afterwards.

Limited application of subsection (2) Subsection (2) applies only for the purposes of the application of the rules in sections YC 2 (Voting interests) and YC 3 (Mar- ket value interests) in the case of the continuity provisions.
Deﬁned in this Act: company, continuity provisions, dispose, option, share, trustee Compare: 2004 No 35 s GC 3 Arrangements involving qualifying companies GB 6 Arrangements involving qualifying companies When this section applies This section applies when— (a) (b) (c) a share in a company has been subject to an arrangement at a time; and the arrangement allows the company or another com- pany (the relevant company) to be a qualifying com- pany at the time; and a purpose of the arrangement is to defeat the intent and application of subpart HA (Qualifying companies (QC) and loss-attributing qualifying companies (LAQC)).
(1) 1380 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 8 (2) Company treated as not qualifying company The relevant company is treated as not being a qualifying com- pany at that time.
Deﬁned in this Act: arrangement, company, qualifying company, share Compare: 2004 No 35 s GC 5 Arrangements involving controlled foreign companies GB 7 Arrangements involving CFC control interests (1) (2) When this section applies This section applies when— (a) 2 or more persons who are New Zealand residents enter into an arrangement; and under the arrangement, a control interest in a foreign company is held by another person; and a purpose of the arrangement is to prevent the foreign company being a controlled foreign company (CFC).
(b) (c) Interest treated as held by residents The control interest is treated as being held by the New Zealand residents in equal proportions, for the purposes of determining whether the company is a CFC.
Deﬁned in this Act: arrangement, CFC, control interest, foreign company, New Zealand resident Compare: 2004 No 35 s GC 7 GB 8 Arrangements involving attributed repatriation from CFCs (1) When this section applies This section applies when— (a) a CFC enters into a loan, security, or other type of ar- rangement (the CFC arrangement) with another per- son; and the CFC arrangement does not directly result in a person having an attributed repatriation from the CFC; and the CFC arrangement has the purpose or effect of allow- ing a person (the investor) to enter into a loan or other arrangement (the investor arrangement); and (b) (c) 1381 Part G s GB 9 Income Tax Act 2007 Reprinted as at 1 January 2010 (d) (e) the investor arrangement would, if it had been made by the CFC, have resulted in a person having some at- tributed repatriation from the CFC; and the purpose or effect of the arrangement is to defeat the intent and application of section CD 45 (When does a person have attributed repatriation from a controlled foreign company?).
Investor arrangement treated as made by CFC For the purposes of applying section CD 45, the investor ar- rangement is treated as having been made by the CFC and not the investor.
Deﬁned in this Act: arrangement, attributed repatriation, CFC Compare: 2004 No 35 s GC 8 (2) GB 9 Temporary disposals of direct control or income interests When this section applies This section applies when,— (a) before the end of a quarter, a person (the disposer), di- rectly or indirectly disposes of a direct control interest or direct income interest in a foreign company (the dis- posal); and the disposal is not to a New Zealand resident who, im- mediately after the disposal, has an income interest of 10% or more in the foreign company from which at- tributed CFC income or attributed repatriation is de- rived; and within 183 days after the disposal, the disposer directly or indirectly acquires a direct control interest or direct income interest in the foreign company (the reacquisi- tion); and the disposal has the effect of reducing attributed CFC income or attributed repatriation of— (i) (ii) (iii) the disposer; or an associated person of the disposer; or if the disposer is a CFC, a person holding an in- come interest in the disposer; and the disposal and reacquisition are part of an arrange- ment that has an effect of defeating the intent and appli- cation of the international tax rules.
(1) 1382 (b) (c) (d) (e) Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 10 (2) Treatment of disposal The disposal is treated as not having occurred, when the per- son’s control interest or income interest in the foreign com- pany at the end of the quarter is calculated, to the extent to which the reacquisition reverses the disposal.
Deﬁned in this Act: arrangement, associated person, attributed CFC income, at- tributed repatriation, CFC, control interest, direct control interest, direct income interest, foreign company, income interest, international tax rules, quarter Compare: 2004 No 35 s GC 9(1), (4), (7) GB 10 Temporary acquisitions of direct control or income interests (1) When this section applies This section applies when,— (a) before the end of a quarter, a person (the acquirer), di- rectly or indirectly acquires a direct control interest or direct income interest in a foreign company (the acqui- sition); and the acquisition is not from a New Zealand resident who, immediately before the acquisition, has an income inter- est of 10% or more in the foreign company from which an attributed CFC loss is incurred; and within 183 days after the acquisition, the acquirer di- rectly or indirectly disposes of a direct control interest or direct income interest in the foreign company (the disposal); and the acquisition has the effect of increasing an attributed CFC loss of— (i) (ii) (iii) the acquirer; or an associated person of the acquirer; or if the acquirer is a CFC, a person holding an in- come interest in the acquirer; and the acquisition and disposal are part of an arrangement that has an effect of defeating the intent and application of the international tax rules.
(b) (c) (d) (e) (2) Treatment of acquisition The acquisition is treated as not having occurred, when the person’s control interest or income interest in the foreign com- 1383 Part G s GB 11 Income Tax Act 2007 Reprinted as at 1 January 2010 pany at the end of the quarter is calculated, to the extent to which the disposal reverses the acquisition.
Deﬁned in this Act: arrangement, associated person, attributed CFC loss, CFC, control interest, direct control interest, direct income interest, foreign company, income interest, international tax rules, quarter Compare: 2004 No 35 s GC 9(1), (4), (7) GB 11 Temporary increases in totals for control interest categories (1) When this section applies This section applies when,— (a) (b) (c) (d) before the end of a quarter, an increase occurs in the total of direct control interests in a foreign company in any of the control interest categories (the total in- crease); and increase results in a person (the interest the total holder) having a reduced income interest or control interest in a foreign company (the interest reduction); and within 365 days after the total increase, a reduction oc- curs in the total for the control interest category (the total reduction); and the interest reduction has the effect of reducing at- tributed CFC income or attributed repatriation of— (i) (ii) (iii) the interest holder; or an associated person of the interest holder; or if the interest holder is a CFC, another person holding an income interest in the interest holder; and (e) the total increase and total reduction are part of an ar- rangement that has an effect of defeating the intent and application of the international tax rules.
(2) Treatment of interest reduction The interest reduction is treated as not having occurred, when the interest holder’s control interest or income interest in the foreign company at the end of the quarter is calculated, to the 1384 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 12 extent to which the total reduction reverses the interest reduc- tion.
Deﬁned in this Act: arrangement, associated person, attributed CFC income, attributed repatriation, CFC, control interest, control interest category, direct control interest, foreign company, income interest, international tax rules, quar- ter Compare: 2004 No 35 s GC 9(2), (7) GB 12 Temporary reductions in totals for control interest categories (1) When this section applies This section applies when,— (a) before the end of a quarter, a reduction in the total of direct control interests in a foreign company occurs in a control interest category (the total reduction); and the total reduction results in a person (the interest holder) having an increased income interest or control interest in a foreign company (the interest increase); and within 365 days after the total reduction, an increase occurs in the total for the control interest category (the total increase); and the interest increase has the effect of increasing an at- tributed CFC loss of— (i) (ii) (iii) the interest holder; or an associated person of the interest holder; or another person holding an income interest in the interest holder, if the interest holder is a CFC; and the total reduction and total increase are part of an ar- rangement which has an effect of defeating the intent and application of the international tax rules.
(b) (c) (d) (e) (2) Treatment of interest increase The interest increase is treated as not having occurred, when the interest holder’s control interest or income interest in the foreign company at the end of the quarter is calculated, to the extent to which the total increase reverses the interest increase.
Deﬁned in this Act: arrangement, associated person, attributed CFC loss, CFC, control interest, control interest category, direct control interest, foreign com- pany, income interest, international tax rules, quarter Compare: 2004 No 35 s GC 9(2), (7) 1385 Part G s GB 13 Income Tax Act 2007 Reprinted as at 1 January 2010 GB 13 When combination of changes reduces income When this section applies This section applies when— (a) (ii) before the end of a quarter, either— (i) a person directly or indirectly disposes of a direct control interest or direct income interest in a for- eign company (the disposal); or an increase occurs in the total of direct control interests in a foreign company in any of the con- trol interest categories (the total increase); and in the case of the disposal, the disposal is not to a New Zealand resident who, immediately after the disposal, has an income interest of 10% or more in the foreign company from which they derive attributed CFC in- come or attributed repatriation; and in the case of the disposal, within 365 days after the disposal, a reduction occurs in the total of direct control interests in the foreign company in any of the control interest categories (the total reduction); and in the case of the total increase, within 365 days after the total increase, a person directly or indirectly acquires a direct control interest or direct income interest in the foreign company (the reacquisition); and the disposal or total increase has the effect of reducing attributed CFC income or attributed repatriation of— (i) (ii) (iii) the person (the interest holder); or an associated person of the interest holder; or if the interest holder is a CFC, a person holding an income interest in the interest holder; and the disposal and total reduction or total increase and reacquisition are part of an arrangement that has an ef- fect of defeating the intent and application of the inter- national tax rules.
(b) (c) (d) (e) (f) Treatment of disposal or total increase The disposal or total increase is treated as not having occurred, when the interest holder’s control interest or income interest in the foreign company at the end of the quarter is calculated, to the extent to which the total reduction or reacquisition has the effect of reversing the effect of the disposal or total increase (1) (2) 1386 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 14 on the level of the interest holder’s control interest or income interest.
Deﬁned in this Act: arrangement, associated person, attributed CFC income, attributed repatriation, CFC, control interest, control interest category, direct control interest, direct income interest, foreign company, income interest, inter- national tax rules, quarter Compare: 2004 No 35 s GC 9(3), (4), (7) GB 14 When combination of changes increases loss (1) When this section applies This section applies when,— (a) (ii) before the end of a quarter, either— (i) a person directly or indirectly acquires a direct control interest or direct income interest in a for- eign company (the acquisition); or a decrease occurs in the total of direct control interests in a foreign company in any of the con- trol interest categories (the total decrease); and in the case of the acquisition, the acquisition is not from a New Zealand resident who, immediately before the acquisition, has an income interest of 10% or more in the foreign company from which they have an attributed CFC loss; and in the case of the acquisition, within 365 days after the acquisition, an increase occurs in the total of direct con- trol interests in the foreign company in any of the con- trol interest categories (the total increase); and in the case of the total reduction, within 365 days after the total reduction, a person directly or indirectly dis- poses of a direct control interest or direct income inter- est in the foreign company (the disposal); and the acquisition or total reduction has the effect of reduc- ing an attributed CFC loss of— (i) (ii) (iii) the person (the interest holder); or an associated person of the interest holder; or if the interest holder is a CFC, a person holding an income interest in the interest holder; and (b) (c) (d) (e) (f) the acquisition and total increase or total reduction and disposal are part of an arrangement that has an effect of 1387 Part G s GB 15 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) defeating the intent and application of the international tax rules.
Treatment of acquisition or total reduction The acquisition or total reduction is treated as not having oc- curred, when the interest holder’s control interest or income interest in the foreign company at the end of the quarter is cal- culated, to the extent to which the total increase or disposal has the effect of reversing the effect of the acquisition or total reduction on the level of the interest holder’s control interest or income interest.
Deﬁned in this Act: arrangement, associated person, attributed CFC loss, CFC, control interest, control interest category, direct control interest, direct income interest, foreign company, income interest, international tax rules, quarter Compare: 2004 No 35 s GC 9(3), (4), (7) GB 15 CFC income or loss: arrangements related to quarterly measurement (1) (2) When this section applies This section applies when— (a) an income interest in a CFC is transferred by a person to an associated person; and the associated persons make an arrangement for making or not making an election under section EX 26(3) (Use of quarterly measurement); and the arrangement has an effect of defeating the intent and application of the international tax rules.
(b) (c) Treatment of election The Commissioner may treat the election as having been made or not made, as applicable, to the extent appropriate to prevent the effect of the arrangement.
Deﬁned in this Act: arrangement, associated person, CFC, Commissioner, in- come interest, international tax rules Compare: 2004 No 35 s GC 10 GB 15B Supplies affecting default test for non-attributing active CFC When this section applies This section applies when a CFC makes a supply— (1) 1388 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 15C (a) (b) to a person who would not meet the requirements of sec- tion EX 21D(1)(a) to (c) (Non-attributing active CFC: default test) for the person to be a member of a test group, under that section, with the CFC; and with the purpose of increasing the amount given by the denominator in the formula in section EX 21D(4) for the CFC.
(2) Income from supply included in gross adjustment The income from the supply is included in the item gross ad- justments in section EX 21D(9)(d).

Deﬁned in this Act: CFC Section GB 15B: inserted (with effect on 30 June 2009), on 6 October 2009, by section 237(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
GB 15C Arrangements related to accounting test for non-attributing active CFC (1) (2) (3) When this section applies This section applies when a person (the party) enters an ar- rangement having a purpose, that is more than incidental, of enabling a CFC to meet the requirements of section EX 21E (Non-attributing active CFC: test based on accounting stand- ard) when the CFC would not meet the requirements of sec- tion EX 21D (Non-attributing active CFC: default test) to be a non-attributing active CFC.
CFC not non-attributing active CFC The CFC is not a non-attributing active CFC.

Person not non-attributing active CFC if type of ﬁnancial arrangement involved A party who is a CFC associated with the CFC is not a non- attributing active CFC if— (a) the arrangement involves a ﬁnancial arrangement pro- ducing a foreign exchange loss for the CFC; and the foreign exchange loss decreases for the CFC the amount of the numerator in the formula in section EX 21E(5).
(b) Deﬁned in this Act: arrangement, associated, CFC, ﬁnancial arrangement, loss, non-attributing active CFC 1389 Part G s GB 16 Income Tax Act 2007 Reprinted as at 1 January 2010 Section GB 15C: inserted (with effect on 30 June 2009), on 6 October 2009, by section 237(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Arrangements involving foreign investment funds GB 16 FIF income or loss: arrangements for measurement day concessions (1) (2) When this section applies This section applies when— (a) an attributing interest in a foreign investment fund (FIF) is transferred by a person to an associated person; and the associated persons make an arrangement for making or not making— (i) an election under section EX 26(3) (Use of quar- terly measurement); or an election under section EX 49(6) (Accounting proﬁts method); or a combination of those elections; and (iii) the arrangement has an effect of defeating the intent and application of the international tax rules.
(ii) (b) (c) Treatment of election The Commissioner may treat an election as having been made or not made, as applicable, to the extent appropriate to prevent the effect of the arrangement.
Deﬁned in this Act: arrangement, associated person, attributing interest, FIF, Commissioner, international tax rules Compare: 2004 No 35 s GC 10 Arrangements involving ﬁlm rights GB 17 Excessive amounts for ﬁlm rights or production expenditure When this section applies This section applies when— (a) a person (the buyer) is allowed a deduction under— (i) section DS 1 (Acquiring ﬁlm rights) for expend- iture incurred in acquiring a ﬁlm right; or (1) 1390 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 18 (ii) section DS 2 (Film production expenditure) for expenditure incurred in acquiring goods or ser- vices in relation to a ﬁlm; and the Commissioner considers that the buyer and the per- son from whom the ﬁlm right, goods or services were acquired (the seller) were not dealing with each other at arm’s length; and the amount of expenditure incurred by the buyer is more than the market value of the ﬁlm right, goods, or ser- vices at the time they were acquired.
(b) (c) Deduction reduced to market value The deduction is reduced to an amount equal to the market value.

Application to shares in ﬁlm rights If the buyer acquires only a share in a ﬁlm right, this section applies only to the part of the total market value of the ﬁlm right that is attributable to that share.
Deﬁned in this Act: Commissioner, deduction, ﬁlm production expenditure, ﬁlm right Compare: 2004 No 35 ss GC 11A, GD 12 (2) (3) GB 18 Arrangements to acquire ﬁlm rights or incur production expenditure (1) When this section applies This section applies if the Commissioner considers that 2 per- sons have made arrangements so that any of the following sec- tions applies more favourably in relation to a person in an in- come year than would have applied without the arrangements: (a) (b) (c) section DS 1 (Acquiring ﬁlm rights): section DS 2 (Film production expenditure): section EJ 4 (Expenditure incurred in acquiring ﬁlm rights in feature ﬁlms): section EJ 5 (Expenditure incurred in acquiring ﬁlm rights in ﬁlms other than feature ﬁlms): section EJ 7 (Film production expenditure for New Zealand ﬁlms): section EJ 8 (Film production expenditure for ﬁlms other than New Zealand ﬁlms).
(d) (e) (f) 1391 Part G s GB 19 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Deduction reduced The deduction allowed to the person under section DS 1 or DS 2 is reduced to the amount that the Commissioner considers would have been allowed had the arrangements not occurred.

Allocation The deduction allocated under section EJ 4, EJ 5, EJ 7, or EJ 8 is allocated to the income year to which the Commissioner considers it would have been allocated had the arrangements not occurred.
Deﬁned in this Act: arrangement, Commissioner, deduction, ﬁlm production expenditure, ﬁlm right, income year Compare: 2004 No 35 ss GC 11B, GD 12B GB 19 When ﬁlm production expenditure payments delayed or contingent (1) (2) When this section applies This section applies when— (a) (b) a person (the payer) is liable to pay any of the costs of goods or services applied in producing a ﬁlm: either— (i) the payment of the costs is deferred under an agreement between the provider of the goods or services and another person, and the period of de- ferral is excessive; or the payment is contingent.
(ii) Costs incurred when paid For the purposes of sections DS 2, EJ 7, and EJ 8 (which relate to ﬁlm production expenditure), the payer is treated as incur- ring the costs at the time of payment.
Deﬁned in this Act: ﬁlm, ﬁlm production expenditure Compare: 2004 No 35 s GD 12A Arrangements involving petroleum mining GB 20 Arrangements involving petroleum mining When this section applies This section applies if the requirements of both of the follow- ing paragraphs are met: (a) an arrangement includes— (1) 1392 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 20 (i) (ii) a disposal of a petroleum mining asset; or the incurring of petroleum exploration expend- iture; or a farm-out arrangement: (iii) the arrangement has a purpose or effect of tax avoid- ance.
(b) (2) Applying section GA 1 The Commissioner may apply section GA 1 (Commissioner’s power to adjust) to adjust the taxable income of a person af- fected by the arrangement so as to counteract a tax advantage obtained by the person.

Examples (3) Without limiting the generality of subsection (1), arrange- ments having the effect of tax avoidance include the arrange- ments described in subsections (4) to (8).
(4) (5) Person acquiring asset relieved or compensated An arrangement has the effect of tax avoidance if it involves the disposal of a petroleum mining asset and it is probable that, at the time the arrangement is entered into, the person acquiring the petroleum mining asset— (a) will, through a related arrangement, not have to suffer some or all of the expenditure of acquiring the petrol- eum mining asset; or will be effectively compensated in some way for some or all of the expenditure.
(b) Person incurring expenditure relieved or compensated An arrangement has the effect of tax avoidance if it involves the incurring of petroleum exploration expenditure and it is probable that, at the time the arrangement is entered into, the person who is to incur the petroleum exploration expend- iture— (a) will, through a related arrangement, not have to suffer some or all of the petroleum exploration expenditure; or will be effectively compensated in some way for some or all of the petroleum exploration expenditure.
(b) 1393 Part G s GB 20 Income Tax Act 2007 Reprinted as at 1 January 2010 (6) (7) (8) (9) Farm-in party relieved or compensated An arrangement has the effect of tax avoidance if it involves a farm-out arrangement and it is probable that, at the time the arrangement is entered into,— (a) the farm-in party will, through a related arrangement, not have to suffer some or all of the farm-in expenditure attributable to the proportionate interest acquired by the farm-in party under the farm-out arrangement; or the farm-in party or an associated person will be effect- ively compensated in some way for some or all of the farm-in expenditure.
(b) Disposal of asset to associated person for over-value An arrangement has the effect of tax avoidance if it involves a petroleum miner disposing of a petroleum mining asset to an associated person for a purpose of ensuring that the associated person has a greater deduction than would have been allowed if the asset had been disposed of for its market value.
Farm-out arrangement with associated person for overvalue An arrangement has the effect of tax avoidance if it involves a petroleum miner entering into a farm-out arrangement with an associated person for a purpose of ensuring that the asso- ciated person has a greater deduction than would have been allowed if the farm-out arrangement had been entered into on substantially the same terms as those on which it would have been entered into with a person who is not associated.
Miners operating offshore This section applies, with the necessary modiﬁcations, to a petroleum miner who undertakes petroleum mining operations that are— (a) outside New Zealand and undertaken through a branch or CFC; and substantially the same as the petroleum mining activ- ities governed by this Act.
(b) Treatment of partners (10) For the purposes of this section, a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their income interest in the part- nership.

1394 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 22 Disposal of part of asset (11) For the purposes of this section, references to the disposal of an asset apply equally to the disposal of part of an asset.
Deﬁned in this Act: arrangement, associated person, CFC, deduction, dispose, farm-in expenditure, farm-out arrangement, New Zealand, petroleum explor- ation expenditure, petroleum miner, petroleum mining asset, petroleum permit, tax avoidance, taxable income Compare: 2004 No 35 s GC 12 Arrangements involving ﬁnancial arrangements GB 21 Dealing that defeats intention of ﬁnancial arrangements rules (1) (2) When this section applies This section applies if the Commissioner considers that the parties to a ﬁnancial arrangement were dealing with each other in a way that defeats the intention of the ﬁnancial arrangements rules at the time the ﬁnancial arrangement was— entered into or otherwise acquired; or (a) varied; or (b) disposed of.
(c) Alteration of consideration The Commissioner may treat the relevant transaction as hav- ing occurred for the consideration that parties dealing at arm’s length would have agreed on.
Deﬁned in this Act: Commissioner, ﬁnancial arrangement, ﬁnancial arrange- ments rules Compare: 2004 No 35 s GD 11 Arrangements involving trust beneﬁciary income GB 22 Arrangements involving trust beneﬁciary income (1) When this section applies This section applies when— (a) an arrangement involves a trustee transferring property, or providing services or other beneﬁts, to a person other than a beneﬁciary of the trust; and the arrangement has the effect of defeating the intent and application of sections HC 17 to HC 23 (which re- (b) 1395 Part G s GB 23 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) late to the income of beneﬁciaries) in relation to the beneﬁciary; and the trust is not a Maori authority.
(c) Application of sections HC 17 to HC 23 The beneﬁciary is treated, for the purposes of sections HC 17 to HC 23, as receiving the property or enjoying the services or beneﬁts.
Deﬁned in this Act: arrangement, Maori authority, trustee Compare: 2004 No 35 s GC 14 Excessive remuneration GB 23 Excessive remuneration to relatives When this section applies: ﬁrst case This section applies when— (a) (b) a person carries on a business or undertaking; and the person employs or engages a relative or, in a case in which the person is a company but not a close company, a relative of a director or shareholder of the company, to perform services for the business or undertaking; and the Commissioner considers that the income payable to the relative for the services is excessive; and the exemption in section GB 24 does not apply.
When this section applies: second case This section also applies when— (a) (b) a person carries on a business in partnership; and the partnership employs or engages a relative of the per- son or, in a case in which the person is a company, a relative of a director or shareholder in the company, to perform services for the business; and the Commissioner considers that the income payable to the relative for the services is excessive; and the exemption in section GB 24 does not apply.
(c) (d) (c) (d) When this section applies: third case This section also applies when— (a) (b) a person carries on a business in partnership; and another partner in the partnership is— a relative of the person; or (i) (1) (2) (3) 1396 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 24 (ii) (iii) if the person is a company, a relative of a director or shareholder in the company; or a company in which a relative of the person is a director or shareholder; and (c) (d) the Commissioner considers that the other partner’s share of partnership proﬁt or losses is excessive; and the exemption in section GB 24 does not apply.
Allocation of income or losses For the purposes of this Act, the Commissioner may allocate the income or losses of the business or undertaking among the parties to the contract or partnership as the Commissioner considers reasonable, without taking into account an amount provided to the relative or other partner.

Treatment of amount allocated An amount the Commissioner allocates to 1 person is treated as not belonging to another person.
Matters for Commissioner’s consideration The Commissioner may take into account each of the follow- ing matters when applying this section: (a) the nature and extent of the services rendered by the relative: the value of the contributions made by the respective partners, by way of services, capital, or otherwise: any other relevant matters.
(b) (c) Treatment of amount allocated back to company If an amount provided by a company to a relative of a director or shareholder for services is allocated to the company under subsection (4), it is treated as a dividend paid by the company and derived by the relative.
Deﬁned in this Act: close company, company, director, dividend, income, rela- tive, shareholder Compare: 2004 No 35 s GD 3(1), (2) (4) (5) (6) (7) GB 24 Exemption for genuine contracts (1) When section GB 23 does not apply Section GB 23 does not apply if the relevant contract of em- ployment, engagement, or partnership is a genuine contract.
1397 Part G s GB 25 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) When contracts genuine A contract is treated as a genuine contract if— (a) (b) (c) the contract is in writing; and the contract is signed by all the parties to it; and in the case of a contract of employment or engagement, each person employed or engaged under the contract is 20 years or older on the date of signing the contract; and in the case of a contract of partnership, each partner is 20 years or older on the date of signing the contract; and the contract is binding for at least 3 years, except for the reasons set out in sections 36 and 38 of the Partnership Act 1908; and in the case of a contract of employment or engagement, each person employed or engaged has real control over their income under the contract; and in the case of a contract of partnership, each partner has— (i) real control over their share of proﬁts under the contract; and real liability for their share of losses under the contract; and (ii) no part of the income or share of proﬁts derived by the relative, or company of which the relative is a share- holder or director, is a gift for the purposes of the Estate and Gift Duties Act 1968.
(d) (e) (f) (g) (h) Deﬁned in this Act: director, income, loss, shareholder, year Compare: 2004 No 35 s GD 3(4), (5) GB 25 Close company remuneration to shareholders, directors, or relatives When this section applies This section applies when— (a) a close company provides remuneration for services to a person (the service provider) who is— (i) (ii) a shareholder or director of the company; or a relative of a shareholder or director of the com- pany; and (b) the Commissioner considers that the amount provided is excessive; and (1) 1398 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 26 (2) (3) (c) the exemption in subsection (3) does not apply.
Excess treated as dividend For the purposes of this Act, the excess is treated as a dividend paid by the company and derived by the service provider.
Exemption: residents working full-time This section does not apply when— (a) (c) (b) the service provider is an adult employed substantially full-time in the business of the company; and the service provider participates in the management of the company; and the amount provided to the service provider was not inﬂuenced by their relationship with a shareholder or director; and the service provider is a New Zealand resident.
(d) Deﬁned in this Act: close company, Commissioner, company, director, divi- dend, New Zealand resident, shareholder Compare: 2004 No 35 s GD 5 Arrangements involving repatriation of commercial bills GB 26 Arrangements involving repatriation of commercial bills (1) When this section applies This section applies when— (a) a commercial bill has been issued by— (i) a New Zealand resident who does not use the money lent in a business carried on through a ﬁxed establishment outside New Zealand; or a non-resident who uses the money lent in a busi- ness carried on through a ﬁxed establishment in New Zealand; and (ii) (b) (c) (d) a non-resident who holds the bill transfers it to another person (the New Zealand transferee); and the non-resident did not become a party to the bill for the purpose of carrying on a business through a ﬁxed establishment in New Zealand; and the New Zealand transferee is either— a New Zealand resident; or (i) 1399 Part G s GB 27 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) a non-resident who becomes a party to the com- mercial bill for the purpose of carrying on a business through a ﬁxed establishment in New Zealand; and (e) the transfer of the bill has the purpose of avoiding non- resident withholding tax (NRWT) or the approved is- suer levy.
Income If the New Zealand transferee redeems the commercial bill, the redemption payment is income of the New Zealand transferee.

New Zealand transferee treated as redeeming bill For the purposes of this section, the New Zealand transferee is treated as redeeming the bill on the scheduled redemption date even if it is not redeemed.
Deﬁned in this Act: approved issuer, commercial bill, ﬁxed establishment, in- come, money lent, New Zealand resident, non-resident, NRWT, redemption payment Compare: 2004 No 35 s GC 14A (2) (3) Attribution rule for income from personal services GB 27 Attribution rule for income from personal services (1) Application of section GB 29 An amount of income in an income year of a person (the as- sociated entity) is attributed to another person (the working person) under section GB 29 for the working person’s corres- ponding tax year if,— (a) during the income year, a third person (the buyer) pur- chases services from the associated entity, and the ser- vices are personally performed by the working person; and the working person is associated with the associated en- tity; and the threshold test in subsection (2) is met; and none of the exemptions in subsection (3) applies.
(b) (c) (d) Threshold for application of attribution rule The attribution occurs only if— (2) 1400 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 27 (a) (b) (c) (d) 80% or more of the associated entity’s total income from personal services during the income year is de- rived from the sale of services to the buyer, a person as- sociated with the buyer, or a combination of them; and 80% or more of the associated entity’s income from per- sonal services during the income year is derived through services personally performed by the working person, a relative of the working person, or a combination of them; and the working person’s net income for the income year, assuming section GB 29 applies in relation to the asso- ciated entity and working person, is more than $70,000; and substantial business assets are not a necessary part of the business structure that is used to derive the total income referred to in paragraph (a).
(3) Exemptions The attribution does not occur— (a) (b) (c) (d) (e) if both the associated entity and the working person are non-residents at all times during the associated entity’s income year: if the associated entity is a natural person and is neither a partner of a partnership nor a trustee of a trust: to the extent to which the services personally performed by the working person are essential support for a prod- uct supplied by the associated entity: if the total amount to be attributed to the working per- son, for the associated entity and the income year, is less than $5,000, unless this paragraph applies to pre- vent income being attributed to the working person for the income year in relation to another associated entity: if the associated entity is a CFC and the amount— (i) is an attributable CFC amount for the CFC under section EX 20B(3)(h) (Attributable CFC amount): gives rise to attributed CFC income under section CQ 2(2B) (When attributed CFC income arises) or attributed CFC loss under section DN 2(2) (When attributed CFC loss arises).
(ii) 1401 Part G s GB 27 Income Tax Act 2007 Reprinted as at 1 January 2010 Treatment of certain dividends If a company that is required to attribute an amount to the working person under this section pays a dividend, sections HA 14 to HA 19 (which relate to qualifying companies) are treated as applying to the company and the dividend if the company— (a) has no net income for the tax year in which it pays the dividend other than income attributed under this sec- tion, ignoring interest income that is incidental to the company’s business; and is not a qualifying company; and chooses to have the dividend treated as if it were paid by a qualifying company.
(b) (c) Cancellation of notional imputation credits For the purposes of subsection (4), to the extent to which the dividend paid by the company would have had an imputation credit attached that arose under section OB 16 (ICA attribu- tion for personal services) in the absence of the election made under subsection (4)(c), the credit is treated as cancelled im- mediately before it would have been attached under sections HA 14 to HA 19 (which relate to dividends paid by qualifying companies).
Deﬁned in this Act: amount, associated person, attributable CFC amount, at- tributed CFC income, attributed CFC loss, business, CFC, company, dividend, imputation credit, income, income year, net income, non-resident, pay, quali- fying company, relative, tax year, trustee Compare: 2004 No 35 ss GC 14B, GC 14E, GC 14EB Section GB 27(2)(c): amended (with effect on 1 April 2008), on 6 October 2009, by section 238(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section GB 27(3)(d): amended (with effect on 30 June 2009), on 6 October 2009, by section 238(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section GB 27(3)(e): added (with effect on 30 June 2009), on 6 October 2009, by section 238(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section GB 27(4) heading: added, on 1 April 2008, by section 407(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section GB 27(4): added, on 1 April 2008, by section 407(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(4) (5) 1402 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 27 Section GB 27(5) heading: added (with effect on 1 April 2008), on 7 Decem- ber 2009, by section 41(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section GB 27(5): added (with effect on 1 April 2008), on 7 December 2009, by section 41(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section GB 27 list of deﬁned terms amount: inserted, on 1 April 2008, by section 407(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section GB 27 list of deﬁned terms attributable CFC amount: inserted (with effect on 30 June 2009), on 6 October 2009, by section 238(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section GB 27 list of deﬁned terms attributed CFC income: inserted (with effect on 30 June 2009), on 6 October 2009, by section 238(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section GB 27 list of deﬁned terms attributed CFC loss: inserted (with ef- fect on 30 June 2009), on 6 October 2009, by section 238(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section GB 27 list of deﬁned terms business: inserted, on 1 April 2008, by section 407(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section GB 27 list of deﬁned terms CFC: inserted (with effect on 30 June 2009), on 6 October 2009, by section 238(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section GB 27 list of deﬁned terms company: inserted, on 1 April 2008, by section 407(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section GB 27 list of deﬁned terms dividend: inserted, on 1 April 2008, by section 407(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section GB 27 list of deﬁned terms imputation credit: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Conse- quential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section GB 27 list of deﬁned terms pay: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Align- ment and Remedial Matters) Act 2009 (2009 No 63).
Section GB 27 list of deﬁned terms qualifying company: inserted, on 1 April 2008, by section 407(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).

Section GB 27 compare note: amended, on 1 April 2008, by section 407(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1403 Part G s GB 28 Income Tax Act 2007 Reprinted as at 1 January 2010 GB 28 Interpretation of terms used in section GB 27 (1) (2) (3) (4) (5) When this section applies This section applies for the purposes of section GB 27.
Associated persons A person is treated as being associated with another person if the person would be treated as associated under the parts of subpart YB (Associated persons and nominees) that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or the 1988 provisions, at the time the services are personally performed by the working person.
Non-associated buyers For the purposes of section GB 27(2)(a), a buyer is not treated as being associated with another buyer if either— both buyers are public authorities; or (a) the working person cannot be reasonably expected to (b) know that a particular buyer is associated with another buyer, other than by making a speciﬁc enquiry.
Relatives For the purposes of section GB 27(2)(b), a person is a relative of the working person only if the person is a relative at the beginning of the relevant income year of the working person.

Fringe beneﬁts included For the purposes of section GB 27(2)(c), the working person’s annual gross income includes the taxable value of a fringe beneﬁt, as determined under sections RD 25 to RD 63 (which relate to fringe beneﬁt tax), provided or granted by a person associated with the working person.
Meaning of substantial business assets (6) Substantial business assets means depreciable property that— (a) at the end of the associated entity’s corresponding in- come year, has a total cost of more than either— (i) (ii) $75,000; or 25% or more of the associated entity’s total in- come from services for the income year; and (b) is not for private use.
1404 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 28 (7) (8) (9) Assets subject to ﬁnance lease, hire purchase agreement, or speciﬁed lease For the purposes of subsection (6)(a), the cost of depreciable property includes— (a) the consideration provided to the lessee in the case of property subject to a ﬁnance lease or a hire purchase agreement, including expenditure or loss incurred by the lessee in preparing and installing the ﬁnance lease asset for use, unless the lessee is allowed a deduction for the expenditure or loss, other than a deduction for an amount of depreciation loss: the cost price, in the case of property subject to a speci- ﬁed lease.
(b) Private use of assets Subsection (6)(b) does not apply to depreciable property if 20% or less of the property’s use is for private use.
Calculation of private proportion of use For the purposes of subsection (8), the percentage of a prop- erty’s use for private purposes for an income year is calculated according to— (a) the proportion that the number of days for which fringe beneﬁt tax is payable by the associated entity in relation to the property bears to the total number of days in the income year in which the property is owned by or is subject to a ﬁnance lease, hire purchase agreement, or speciﬁed lease, involving the associated entity, if the property is subject to the FBT rules: the proportion that the expenditure incurred in relation to the property, for which a deduction is denied to the associated entity, bears to all expenditure incurred by the associated entity in relation to the property in the income year, if the property is not subject to the FBT rules.
(b) Deﬁned in this Act: 1973 version provisions, 1988 version provisions, 1990 version provisions, annual gross income, associated person, consideration, cost price, deduction, depreciable property, FBT rules, ﬁnance lease, fringe beneﬁt, fringe beneﬁt tax, hire purchase agreement, income, income year, public au- thority, relative, speciﬁed lease, substantial business asset Compare: 2004 No 35 s GC 14C 1405 Part G s GB 29 Income Tax Act 2007 Reprinted as at 1 January 2010 Section GB 28(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 239(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
GB 29 Attribution rule: calculation (b) (c) Amount attributed A working person is treated as deriving income in an income year equal to the least of the following amounts: (a) the associated entity’s net income for the corresponding tax year, calculated as if their only income were derived from personal services: the associated entity’s net income for the corresponding tax year: if and to the extent to which the associated entity is a company or a trust that has a loss balance to be carried forward under section IA 4 (Using loss balances car- ried forward to tax year) arising from a business or a trading activity of selling personal services, the associ- ated entity’s net income for the corresponding tax year after subtracting the loss balance carried forward from an earlier corresponding tax year.
Calculation for trustee or partnership For the purposes of calculating the associated entity’s net in- come for the corresponding tax year in the application of sub- section (1),— (a) if the associated entity is a trustee of a trust, the trustees are treated as not having made a distribution of beneﬁ- ciary income out of the year’s income: if the associated entity is a partnership, the associated entity is treated as a taxpayer and section HG 2 (Part- nerships are transparent) does not apply.
(b) Salary paid or fringe beneﬁts treated as deductions For the purposes of calculating the associated entity’s net in- come for the corresponding tax year in the application of sub- section (1),— (a) the associated entity is allowed a deduction for employ- ment income paid to the working person during the in- come year: (1) (2) (3) 1406 Reprinted as at 1 January 2010 (b) Income Tax Act 2007 Part G s GB 29 the associated entity is allowed a deduction for the tax- able value of a fringe beneﬁt provided or granted by the associated entity to the working person during the in- come year, and for the fringe beneﬁt tax payable on the fringe beneﬁt.
(4) (5) (6) Reduction of attributable income for distributions For the purposes of calculating the associated entity’s net in- come for the corresponding tax year in the application of sub- section (1), the amount of net income of the associated entity for the corresponding tax year is reduced by— (a) in the case of a trustee of a trust, the amount of bene- ﬁciary income derived by the working person from the trust in the income year: in the case of a partnership, the share of proﬁts allocated by the partnership to the working person: in the case of a company, a dividend paid— (i) by the associated entity to the working person during the income year or before the end of 6 months after the end of the income year; and from income derived in the income year.
(ii) (b) (c) Attribution reduced by market value of administrative services If the associated entity is a partnership that receives admin- istrative services from another person related to their income from personal services and has not paid for the administrative services, the amount to be attributed to the working person is reduced by the market value of the administrative services pro- vided by the other person.
Reduction of beneﬁciary income when rule results in trust having tax loss If the associated entity is a trustee and the amount attributable would cause the associated entity to have a tax loss for the corresponding tax year, for the purposes of this Act,— (a) beneﬁciary income from the trust for the income year must be reduced to the extent to which the associated entity’s taxable income for the corresponding tax year is zero; and 1407 Part G s GB 30 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the reduction in beneﬁciary income must be divided among the beneﬁciaries other than the working per- son— (i) according to proportions determined by the trust’s trustees: if the trustees do not make the determination, ac- cording to the proportion that each beneﬁciary’s beneﬁciary income bears to the total beneﬁciary income from the trust for the income year.
(ii) (7) Attribution to more than 1 working person If the amount attributable is to be attributed to more than 1 working person, the share attributed to each working person must reﬂect the respective value of the services personally per- formed by each working person.
Deﬁned in this Act: beneﬁciary income, company, deduction, dividend, fringe beneﬁt, fringe beneﬁt tax, income, income year, net income, taxpayer, tax loss, tax year, trustee Compare: 2004 No 35 s GC 14D Section GB 29(2)(b): amended, on 1 April 2008, by section 16(1) of the Taxa- tion (Limited Partnerships) Act 2008 (2008 No 2).
Arrangements involving restrictive covenants GB 30 Arrangements to avoid taxation of restrictive covenant payments When this section applies This section applies if a person enters into an arrangement that has an effect of avoiding section CE 9 (Restrictive covenants).
Treatment as restrictive covenant payment The Commissioner may treat— (a) an amount provided under the arrangement as an amount to which section CE 9(2) applies; and a person affected by the arrangement as the person who gave the undertaking referred to in section CE 9(1).
(b) (1) (2) 1408 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 31 (3) Example An example of an arrangement that may be subject to this sec- tion is an arrangement that involves a collateral arrangement to dispose of property.
Deﬁned in this Act: arrangement, Commissioner Compare: 2004 No 35 s GC 14F Arrangements involving fringe beneﬁt tax GB 31 FBT arrangements: general (1) (2) (3) When this section applies This section applies when— (a) (b) 2 or more persons enter into an arrangement; and a purpose or effect of the arrangement is to defeat the intent and application of any of the FBT rules; and the purpose or effect is not merely incidental.
(c) FBT rules treated as applying For the purposes of the FBT rules, the Commissioner may treat— (a) a party to the arrangement (the provider) as the em- ployer of a person (the recipient) of whom the Com- missioner notiﬁes the provider: the recipient as the employee of the provider: a beneﬁt as being provided by the provider to the recipi- ent through the employment of the recipient.
(b) (c) Actual or likely beneﬁt The Commissioner may apply subsection (2)(c) only in the case of a beneﬁt that,— (a) (b) is in fact provided by the provider to the recipient; or had the arrangement not occurred, the recipient— (i) (ii) would in all likelihood have obtained; or (iii) might be expected to have obtained.
would have obtained; or 1409 Part G s GB 32 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Arrangements to reduce motor vehicle costs Schedule 5, clause 4(c) (Fringe beneﬁt values for motor ve- hicles) may apply to treat the cost of a motor vehicle as equal to its market value.
Deﬁned in this Act: arrangement, Commissioner, employee, employer, em- ployment, FBT rules Compare: 2004 No 35 ss GC 16(b), GC 17 GB 32 Beneﬁts provided to employee’s associates When this section applies This section applies when— (a) (b) (c) (d) (b) (c) (d) a beneﬁt is provided to a person who is associated with an employee of an employer; and the beneﬁt would be a fringe beneﬁt if provided to the employee; and the beneﬁt is provided either by the employer or by an- other person under an arrangement with the employer for providing the beneﬁt; and the exemption in subsection (2) does not apply.
Exemption for shareholder-employees and corporate associates Subsection (3) does not apply when— (a) the beneﬁt is provided by an employer that is a com- pany; and the employee is a shareholder in the company; and the person associated with the employee is a company; and the beneﬁt is not provided under an arrangement that has a purpose of providing the beneﬁt either— in place of employment income; or (i) free from fringe beneﬁt tax.
(ii) Beneﬁt treated as provided to employee For the purposes of the FBT rules, the beneﬁt is treated as provided by the employer to the employee.

Application of section CX 18 Section CX 18 (Beneﬁts provided to associates of both em- ployees and shareholders) applies to determine when a beneﬁt (1) (2) (3) (4) 1410 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 34 provided to an associate of both an employee and a shareholder is treated as a fringe beneﬁt and not a dividend.
Deﬁned in this Act: arrangement, associated person, company, dividend, em- ployee, employer, employment income, FBT rules, fringe beneﬁt, fringe beneﬁt tax Compare: 2004 No 35 s GC 15(1)–(3) Arrangements involving depreciation loss GB 33 Arrangements involving depreciation loss (1) (2) When this section applies This section applies when— (a) an asset of a person has been subject to an arrangement; and the arrangement allows the person or another person to have a deduction for an amount of depreciation loss; and a purpose of the arrangement is to defeat the intent and application of this Act.
(b) (c) No deduction The relevant person is denied the deduction.
Deﬁned in this Act: arrangement, Commissioner, deduction, depreciation loss Compare: 2004 No 35 s GC 6 Arrangements involving imputation rules GB 34 ICA arrangements for carrying amounts forward (1) When this section applies This section applies when— (a) a share in an imputation credit account (ICA) company or another company has been subject to an arrangement, including an arrangement directly or indirectly altering rights attached to the share; and the arrangement allows the ICA company to meet the requirements of section OB 41 (ICA debit for loss of shareholder continuity); and a purpose of the arrangement is to defeat the intent and application of section OB 41.
(b) (c) 1411 Part G s GB 35 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Company treated as not meeting requirements The ICA company is treated as not meeting the requirements in relation to the share.
Deﬁned in this Act: arrangement, company, imputation credit account, share Compare: 2004 No 35 s GC 21 GB 35 Imputation arrangements to obtain tax advantage When section GB 36 applies Section GB 36 applies if an arrangement to obtain a tax ad- vantage arises as described in either subsection (2) or (3).
Share disposal or issue arrangements An arrangement is an arrangement to obtain a tax advantage if— (a) the arrangement is for the disposal or issue of shares; and a party to the arrangement might reasonably have ex- pected that a dividend would be paid in relation to the shares with an imputation credit or foreign dividend payment (FDP) credit attached; and a party might reasonably have expected that a party will, or will not, be able to obtain a tax advantage from the credit; and a purpose of the arrangement is that a party will obtain a tax advantage; and the purpose is not a merely incidental one.
(b) (c) (d) (e) Dividend or credit streaming arrangements An arrangement is an arrangement to obtain a tax advantage if— (a) the arrangement relates to 1 or more distributions by a company, including bonus issues, during 1 or more tax years; and under the arrangement, the company streams— (i) (ii) (iii) (iv) the payment of dividends; or the attachment of imputation credits; or the attachment of FDP credits; or the attachment of both imputation credits and FDP credits; and (b) (1) (2) (3) 1412 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 36 (c) the streaming will give a higher credit value to a person who will obtain a tax advantage from the higher credit value than to a person who will not or may reasonably be expected to obtain a lesser beneﬁt.
(4) Meaning of higher credit value For the purposes of subsection (3)(c), a dividend has a higher credit value than another dividend if any of the following ap- plies: (a) the dividend has an attached imputation credit and the other dividend does not: the imputation ratio of the dividend is higher than that of the other dividend: the dividend has an attached FDP credit and the other dividend does not: the FDP ratio of the dividend is higher than that of the other dividend: the dividend has attached both an imputation credit and an FDP credit and the other dividend does not have both types of credit attached: the combined imputation ratio and FDP ratio of the divi- dend is higher than that of the other dividend.
(b) (c) (d) (e) (f) Deﬁned in this Act: arrangement, combined imputation and FDP ratio, divi- dend, FDP credit, FDP ratio, higher credit value, imputation credit, imputation ratio, share, tax advantage Compare: 2004 No 35 s GC 22(1), (2) GB 36 Reconstruction of imputation arrangements to obtain tax advantage (1) Reconstruction of either type of arrangement In the case of a share disposal or issue arrangement described in section GB 35(2), or a streaming arrangement described in section GB 35(3), if the Commissioner decides this subsection should apply, the following paragraphs apply: (a) a person who would get a tax credit advantage from the arrangement is denied it: a company that would get an account advantage from the arrangement has a debit to its imputation credit ac- count or FDP account, as applicable, in the tax year in which the arrangement began.
(b) 1413 Part G s GB 36 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) (5) Reconstruction of streaming arrangement In the case of a streaming arrangement described in section GB 35(3) in which the company is the only party, or if the Com- missioner decides this subsection should apply, the company has a debit to its imputation credit account or FDP account, as applicable, in the tax year in which the arrangement began.
Subsection (1) does not apply to the extent to which this sub- section applies to the arrangement.

Amount of adjustment The amount of the credit or refund denied under subsection (1)(a) and the debit arising under subsection (1)(b) or (2) is in each case the amount of the imputation credit or FDP credit that the Commissioner determines is subject to the arrange- ment.
Commissioner’s powers of determination The Commissioner may make determinations for the purposes of this section under section 90AF of the Tax Administration Act 1994.
Some deﬁnitions In this section and section 90AF of the Tax Administration Act 1994,— account advantage means— (a) a credit arising to an imputation credit account under sections OB 4 to OB 29 (which relate to credits arising to imputation credit accounts); or a credit arising to an FDP account under sections OC 6 to OC 12 (which relate to credits arising to FDP ac- counts) (b) tax credit advantage means— (a) a tax credit allowed under section LE 1 (Tax credits for imputation credits); or a tax credit allowed under section LF 1 (Tax credits for FDP credits); or (b) 1414 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 37 (c) a refund of FDP obtained under section LF 8 (Credits for persons who are non-resident or who receive exempt income).
Deﬁned in this Act: account advantage, arrangement, Commissioner, company, FDP account, FDP credit, imputation credit, imputation credit account, notice, tax credit advantage, tax year Compare: 2004 No 35 s GC 22(4), (5), (9) GB 37 Arrangements for payment of dividend by other companies (1) (2) (3) (4) When this section applies This section applies when— (a) (b) an arrangement is entered into in relation to a company (the ﬁrst company) and a shareholder in the ﬁrst com- pany; and the arrangement has a purpose of allowing a dividend to be paid by another company to any of the following parties (the payee): (i) (ii) the shareholder: if the shareholder is a trustee in relation to the shareholding, a beneﬁciary of the trust: an associated person of the shareholder: an associated person of a beneﬁciary of the trust.
(iii) (iv) Direct or indirect payments The arrangement may include— (a) (b) the payee acquiring shares in the other company: a form of indirect payment of a dividend from the other company.

Dividend treated as paid by ﬁrst company For the purposes of the imputation rules, the dividend is treated as if it were paid by the ﬁrst company.
No imputation credit Any imputation credit attached to the dividend paid by the other company— (a) is not included in the amount of the dividend derived by the payee; and is not treated as an imputation credit for the purposes of section LE 1 (Tax credits for imputation credits); and (b) 1415 Part G s GB 38 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) is a debit under section OB 30 (ICA payment of divi- dend) of the ﬁrst company.
Deﬁned in this Act: arrangement, associated person, company, dividend, im- putation credit, imputation credit account, share, shareholder, trustee Compare: 2004 No 35 s GC 23 GB 38 When sections GB 35 to GB 37 apply to consolidated groups (1) (2) Tax advantage arrangements Sections GB 35 and GB 36 apply, with the necessary modi- ﬁcations, in a case that involves accounts of a consolidated group as if— (a) (b) the consolidated group were a single company; and references to provisions of this Act were references to the equivalent provisions applicable to the equivalent accounts.
Arrangement for dividend from another company If a company is treated by section GB 37(3) as having paid a dividend, and is at the time of payment a member of a con- solidated group, section GB 37 applies as if the reference to section OB 30 (ICA payment of dividend) were a reference to section OP 28 (Consolidated ICA payment of dividend).
Deﬁned in this Act: company, consolidated group, dividend Compare: 2004 No 35 s GC 24 Arrangements involving foreign dividends GB 39 FDP arrangements: general [Repealed] Section GB 39: repealed (with effect on 30 June 2009), on 6 October 2009, by section 240(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
GB 40 BETA arrangements for carrying amounts forward When this section applies This section applies when— (a) a share in a branch equivalent tax account (BETA) com- pany or another company has been subject to an ar- (1) 1416 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 41 rangement, including an arrangement directly or indi- rectly altering rights attached to the shares; and the arrangement allows the BETA company to meet the requirements of section OE 10 or OE 15 (which relate to credits and debits arising to branch equivalent tax accounts); and a purpose of the arrangement is to defeat the intent and application of section OE 10 or OE 15.
(b) (c) (2) Company treated as not meeting requirements The BETA company is treated as not meeting the requirements of the relevant provision in relation to the share.
Deﬁned in this Act: arrangement, BETA company, company, share Compare: 2004 No 35 s GC 26 GB 41 FDPA arrangements for carrying amounts forward (1) When this section applies This section applies when— (a) a share in a foreign dividend payment account (FDPA) company or another company has been subject to an ar- rangement, including an arrangement directly or indi- rectly altering rights attached to the share; and the arrangement allows the FDPA company to meet the requirements of section OC 24 (FDPA debit for loss of shareholder continuity); and a purpose of the arrangement is to defeat the intent and application of section OC 24.
(b) (c) (2) Company treated as not meeting requirements The FDPA company is treated as not meeting the requirements of section OC 24 in relation to the share.
Deﬁned in this Act: arrangement, FDPA company, share Compare: 2004 No 35 s GC 27 1417 Part G s GB 42 Income Tax Act 2007 Reprinted as at 1 January 2010 Arrangements involving Maori authority credits GB 42 Maori authority credit arrangements to obtain tax advantage When section GB 43 applies Section GB 43 applies if an arrangement to obtain a tax ad- vantage arises as described in either subsection (2) or (3).
Arrangements for share disposal or issue An arrangement is an arrangement to obtain a tax advantage if— (a) the arrangement is for the disposal or issue of a share in a Maori authority that is a company; and a party to the arrangement might reasonably have ex- pected that a taxable Maori authority distribution would be paid in relation to the share with a Maori authority credit attached; and a party might reasonably have expected that a party will or will not be able to obtain a tax advantage from the credit; and a purpose of the arrangement is that a party will obtain a tax advantage; and the purpose is not a merely incidental one.
(b) (c) (d) (e) Distribution or credit streaming arrangements An arrangement is an arrangement to obtain a tax advantage if— (a) the arrangement is in relation to 1 or more taxable Maori authority distributions by a Maori authority during 1 or more tax years; and under the arrangement, the Maori authority streams— (i) (ii) the streaming will give a higher credit value to a mem- ber who will obtain a tax advantage from the higher credit value than to a member who will not or may rea- sonably be expected to obtain a lesser beneﬁt.
the distributions; or the attachment of Maori authority credits; and (b) (c) Meaning of higher credit value A taxable Maori authority distribution has a higher credit value than another distribution if either of the following ap- plies: (1) (2) (3) (4) 1418 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 43 (a) (b) the distribution has a Maori authority credit and the other distribution does not: the Maori authority credit ratio under section OK 19(2) (Maori authority credits attached to distributions) of the distribution is higher than that of the other distribution.
Deﬁned in this Act: arrangement, Maori authority, Maori authority credit, mem- ber, share, tax advantage, taxable Maori authority distribution Compare: 2004 No 35 s GC 27A(1)–(3) GB 43 Reconstruction of Maori authority credit arrangements to obtain tax advantage (1) (2) (3) Reconstruction of either type of arrangement In the case of an arrangement for a share disposal or issue as described in section GB 42(2) or a streaming arrangement as described in section GB 42(3), if the Commissioner decides this subsection should apply, the following paragraphs apply: a member who would get a tax credit advantage from (a) the arrangement is denied it: a Maori authority that would get both a tax credit ad- vantage and an account advantage from the arrangement has a debit to its Maori authority credit account in the tax year in which the arrangement began.
(b) Reconstruction of streaming arrangement In the case of a streaming arrangement as described in sec- tion GB 42(3) in which the Maori authority is the only party, or if the Commissioner decides this subsection should apply, the Maori authority has a debit to its Maori authority credit account in the tax year in which the arrangement began.

Sub- section (1) does not apply to the extent to which this subsection applies to the arrangement.
Amount of adjustment The amount of the credit denied under subsection (1)(a) and the debit arising under subsection (1)(b) or (2) is in each case the amount of the Maori authority credit that the Commis- sioner determines is subject to the arrangement.

1419 Part G s GB 44 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) (5) Commissioner’s powers of determination The Commissioner may make determinations for the purposes of this section under section 90AG of the Tax Administration Act 1994.
Some deﬁnitions In this section and section 90AG of the Tax Administration Act 1994,— account advantage means a credit arising to a Maori authority credit account under sections OK 2 to OK 9 (which relate to credits arising to Maori authority credit accounts) tax credit advantage means a tax credit allowed under section LO 1 (Tax credits for Maori authority credits).
Deﬁned in this Act: account advantage, arrangement, Commissioner, Maori au- thority, Maori authority credit, Maori authority credit account, member, notice, tax credit advantage, tax year Compare: 2004 No 35 s GC 27A (5), (6), (10) Arrangements involving tax credits for families Heading: substituted, on 1 April 2008, by section 408(1) of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
GB 44 Arrangements involving tax credits for families When this section applies This section applies if both of the following paragraphs are met: (a) a person (the claimant) enters into an arrangement with another person: a purpose of the arrangement is that subparts MA to MF and MZ (which relate to tax credits for families) has a more favourable effect for the claimant than would otherwise have occurred.
(b) Credit reduced The claimant’s tax credit under subparts MA to MF and MZ is reduced to the amount that the Commissioner considers would have arisen had the arrangement not occurred.

Deﬁned in this Act: arrangement, Commissioner Compare: 2004 No 35 s GC 28 Section GB 44 heading: amended, on 1 April 2008, by section 408(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(1) (2) 1420 (1) (2) Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 45 Arrangements involving money not at risk GB 45 Arrangements involving money not at risk Application of section GB 46 Section GB 46 can apply to an arrangement when— (a) (b) (c) (d) (e) a person sells or issues, or promotes the selling or is- suing of, the arrangement, whether or not for remuner- ation; and a person (the participant) who is a party to the arrange- ment or affected by it, considered together with their affected associates, has for an assessment period a total amount of deductions from the arrangement that is more than their total amount of assessable income from the ar- rangement, having regard to the rules in subsection (2); and as part of or for the purposes of the arrangement, the participant or an affected associate borrows a limited- recourse amount under a limited-recourse loan; and on the relevant balance date, the total of the limited-re- course amounts of the limited-recourse loans of the par- ticipant and affected associates is more than half of the total cost of their arrangement property on the relevant balance date; and on the relevant balance date, the total cost of their ar- rangement property is more than 142.85% of the total cost of the part of the property that is acceptable prop- erty.
Certain deductions or income disregarded For the purposes of subsection (1)(b), the following amounts are disregarded: (a) (b) a deduction under section GB 46: a tax loss component of a loss-attributing qualifying company (LAQC) to the extent to which it is attributed to shareholders under section HA 20 (Attribution of tax losses): an amount of income under section GB 46.
(c) Some deﬁnitions In this section,— (3) 1421 Part G s GB 46 Income Tax Act 2007 Reprinted as at 1 January 2010 acceptable property is— land: (a) buildings: (b) (c) plant: (d) machinery: (e) (f) (g) shares in a listed company that in total represent a direct voting interest of 10% or less in the listed company: a share and an option that are acquired or created with an intention that the share or option will produce income that is employment income of a participant under sec- tion CE 1(1)(d) (Amounts derived in connection with employment): a share in a foreign company, if the proceeds of a dis- posal of the share would not be assessable income of the holder other than under the FIF rules arrangement property means property held as part of the ar- rangement by the participant and affected associates assessment period is any of— (a) the earliest income year (the ﬁrst income year) in which an interest in the arrangement was acquired by the participant or an affected associate of the partici- pant: the ﬁrst income year and the next income year: (b) (c) the ﬁrst income year and the next 2 income years relevant balance date means the balance date, or the latest balance date, of the participant and affected associates that ends the assessment period.
Deﬁned in this Act: acceptable property, affected associate, arrangement, ar- rangement property, assessable income, assessment period, deduction, direct voting interest, dispose, employment income, FIF rules, foreign company, in- come, income year, LAQC, limited-recourse amount, limited-recourse loan, relevant balance date, share, shareholder, tax loss component Compare: 2004 No 35 s GC 29 (1) Section GB 45(3) acceptable property: amended (with effect on 1 April 2008), on 6 October 2009, by section 241 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
GB 46 Deferral of surplus deductions from arrangements When this section applies This section applies when— (1) 1422 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 46 (a) (b) (c) (d) (e) (f) an arrangement of the type described in section GB 45 is made; and a person (the participant) is a party to the arrangement or affected by it; and the participant is not an LAQC; and the participant has, for an income year, a total amount of deductions from the arrangement that is more than their total amount of assessable income from the ar- rangement, having regard to the rules in subsection (6); and the participant considered together with their affected associates, excluding an LAQC that has a tax loss from the arrangement for the income year, has for the income year a total amount of deductions from the arrangement that is more than their total amount of assessable income from the arrangement, having regard to the rules in sub- section (6); and on the balance date, or the latest balance date, of the participant and affected associates for the income year, the arrangement involves a limited-recourse loan in re- lation to which the participant or an affected associate of the participant is a borrower.
Income for participant The participant is treated as deriving in the income year an amount of assessable income calculated using the formula— Deﬁnition of items in formula In the formula,— (a) (b) participant’s excess deductions is the amount of ex- cess deductions of the participant for the income year described in subsection (1)(d): total individual excess deductions is the amount, for the income year, by which the total deductions from the arrangement are more than the total assessable income from the arrangement, having regard to the rules in sub- section (6), for the group that consists of— (i) the participant; and 1423 (2) (3) Part G s GB 46 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) each affected associate of the participant who is not an LAQC and who has, for the income year, a total amount of deductions from the arrangement that is more than their total assessable income from the arrangement, having regard to the rules in subsection (6): (c) total ineligible amount is the lesser of— (i) (ii) the total individual excess deductions for the group and the income year as described in sub- section (1)(e); and the total limited-recourse amount that, on the bal- ance date or the latest balance date of the partici- pant and the affected associates, the participant and the affected associates have an undischarged obligation to repay as part of or for the purposes of the arrangement.
Matching deduction in following year A participant who has an amount of assessable income for an income year under subsection (2) has a deduction of an equal amount for the following income year.
Obligation to repay limited-recourse amount not discharged For the purposes of subsections (1) and (3)(c)(ii), an obliga- tion to repay a limited recourse amount is not discharged by a transaction to the extent to which the transaction— (a) involves, as part of the arrangement, the use of— (i) a put or call option that is not a contract for the sale for future delivery of goods at market value: (ii) a contract of insurance or guarantee; and does not give rise to assessable income for the per- son who is the borrower of the limited-recourse amount under the limited-recourse loan.
(b) Some deductions included, some income excluded For the purposes of subsections (1)(d) and (e) and (3)(b),— (a) a deduction of a person includes— (i) (ii) a deduction under subsection (4); and a deduction under section HA 20 (Attribution of tax losses); and (4) (5) (6) 1424 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 48 (b) income of a person excludes an amount of income aris- ing under subsection (2).
Deﬁned in this Act: arrangement, assessable income, associated person, deduc- tion, income year, LAQC, limited-recourse amount, limited-recourse loan, tax loss Compare: 2004 No 35 s GC 31 GB 47 Calculation rules for sections GB 45 and GB 46 (1) (2) Consolidation of assessable income and deductions, and cost of property The deductions and assessable income from an arrangement for each person in a group of persons, and the cost of property that is held by each person in the group as part of the arrange- ment, are calculated on a basis of consolidation for the elim- ination of intra-group balances in accordance with generally accepted accounting practice.
Calculation of assessable income and deductions, and cost of property The deductions and assessable income from an arrangement for each person in a group of persons, and the cost of property that is held by each person in the group as part of the arrange- ment, are calculated using the proportionate method in accord- ance with generally accepted accounting practice for partner- ships, if the group is any of— (a) persons who are a partnership and the partners in a part- nership: a joint venture and the partners in the joint venture: an LAQC and the shareholders in the LAQC.
(b) (c) Deﬁned in this Act: arrangement, assessable income, deduction, generally ac- cepted accounting practice, LAQC, shareholder Compare: 2004 No 35 s GC 29(2), (3) GB 48 Deﬁned terms for sections GB 45 and GB 46 (1) Affected associate For an arrangement, a person is an affected associate of an- other person if each person is a party to the arrangement or is affected by the arrangement, and— (a) 1 person is an LAQC and the other person is a share- holder in the LAQC; or 1425 Part G s GB 48 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the persons are associated under the parts of subpart YB (Associated persons and nominees) that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or the 1988 version pro- visions.
Limited-recourse amount A limited-recourse amount, for a limited-recourse loan, means the total for the limited-recourse loan of the amounts for which the obligations of a borrower are affected in a way that is described in subsection (3)(c).
Limited-recourse loan A limited recourse loan means a ﬁnancial arrangement that meets each of the following requirements: (a) (b) it is not an excepted ﬁnancial arrangement: it involves the provision of money by a person (the lender) to another person (the borrower): it has 1 or more of the following effects, or an effect which is substantially similar: (i) relieving the borrower from the obligation to re- pay all or some of the money, whether the relief is contingent or not: requiring the borrower to make no repayment for a period of 10 or more years from the date on which the loan is made, other than repayments for the purpose of defeating the intent and appli- cation of section GB 46: providing that the repayment of the money is in substance secured solely against assets that are employed in the arrangement: (ii) (iii) if the lender is not an associated person of the borrower under subpart YB, the lender provides the money on terms that are not arm’s length and the lender is either— not a person who regularly provides money to (i) persons on arm’s length terms under arrange- ments that do not meet the requirements of para- graphs (a) to (c); or a person who is neither a New Zealand resident nor carrying on business in New Zealand through a ﬁxed establishment in New Zealand: (ii) (c) (d) (2) (3) 1426 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GB 49 (e) if the lender is an associated person of the borrower under subpart YB, the lender obtains the money under an arrangement that meets the requirements of para- graphs (a) to (c).
Deﬁned in this Act: 1973 version provisions, 1988 version provisions, 1990 version provisions, affected associate, arrangement, associated person, excepted ﬁnancial arrangement, ﬁnancial arrangement, ﬁxed establishment, LAQC, listed company, money, resident in New Zealand Compare: 2004 No 35 s GC 30 limited-recourse amount, limited-recourse loan, Section GB 48(1)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 242(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Arrangements involving returning share transfers GB 49 Arrangements involving returning share transfers (1) (2) When this section applies This section applies when— (a) (b) a person enters into an arrangement; and an effect of the arrangement means that a requirement of the deﬁnition of returning share transfer is not met; and the effect of the arrangement is to defeat the intent and application of this Act.
(c) Arrangement treated as returning share transfer The Commissioner may treat— (a) (b) the arrangement as a returning share transfer; and a person affected by the arrangement as a share user or a share supplier, under the returning share transfer.
Deﬁned in this Act: arrangement, Commissioner, returning share transfer, share supplier, share user Compare: 2004 No 35 s GC 14G Arrangements involving partners Heading: added, on 1 April 2008, by section 17(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
1427 Part G s GB 50 Income Tax Act 2007 Reprinted as at 1 January 2010 GB 50 Arrangements involving partners (1) When this section applies This section applies when— (a) (b) (c) a partner of a partnership enters into an arrangement; and the arrangement involves an amount of consideration (the arrangement amount of consideration) that is not a market value amount of consideration; and the arrangement has a purpose or effect of defeating the intent and application of subpart HG (Joint venturers, partners, and partnerships).
(2) Market value amount substituted A market value amount of consideration is substituted for the arrangement amount of consideration.

Deﬁned in this Act: amount, arrangement, partner, partnership Section GB 50: added, on 1 April 2008, by section 17(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
Subpart GC—Market value substituted Disposals of trading stock or similar property GC 1 Disposals of trading stock at below market value When this section applies This section applies if a person (the transferor) disposes of trading stock to another person (the transferee) for— (a) (b) no consideration: an amount of consideration that is less than the market value of the trading stock at the time of disposal.
Disposal treated as being for market value For the purposes of this Act, the consideration received by the transferor and provided by the transferee is treated as being an amount equal to the market value at the time.

Shares in trading stock In this section, trading stock includes a share in trading stock.
Exclusions This section does not apply to a disposal of trading stock— (a) under a relationship agreement: (1) (2) (3) (4) 1428 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GC 2 (b) (c) (d) for use by the transferee in a farming, agricultural, or ﬁshing business that is affected by a self-assessed ad- verse event, if the transferor and transferee are not as- sociated persons: under a share-lending arrangement, by a share user to a share supplier or by a share supplier to a share user: in the surrender of an emissions unit under the Climate Change Response Act 2002.
Deﬁned in this Act: amount, emissions unit, relationship agreement, self-as- sessed adverse event, share-lending arrangement, share supplier, share user, surrender, trading stock Compare: 2004 No 35 s GD 1(1), (3), (4) Section GC 1(4)(c): amended (with effect on 26 September 2008), on 6 October 2009, by section 243(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section GC 1(4)(d): added (with effect on 26 September 2008), on 6 October 2009, by section 243(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section GC 1 list of deﬁned terms emissions unit: inserted (with effect on 26 September 2008), on 6 October 2009, by section 243(2)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section GC 1 list of deﬁned terms qualifying event: repealed (with effect on 26 September 2008), on 6 October 2009, by section 243(2)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section GC 1 list of deﬁned terms surrender: inserted (with effect on 26 September 2008), on 6 October 2009, by section 243(2)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
GC 2 Disposals of timber rights or standing timber (1) When section GC 1 applies Section GC 1 applies to each of the following disposals as if it were a disposal of trading stock— (a) a grant of a right to take timber, other than in favour of the grantor: a disposal of standing timber as part of the disposal of the land on which it stands, other than a disposal subject to a right in favour of the seller to take timber.
(b) 1429 Part G s GC 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Exclusion Subsection (1) does not apply to a disposal of land with stand- ing timber if the disposal is within 1 of the exclusions in sec- tion CB 25(2) (Disposal of land with standing timber).

Limitation Section GC 1(3) does not apply if the disposal is of land with standing timber subject to a right to take timber.
Deﬁned in this Act: timber, trading stock Compare: 2004 No 35 s GD 1(2), (3A) GC 3 Disposals by life insurers Section GC 1 applies to a life insurer that disposes of any property, other than a ﬁnancial arrangement, in the course of their business of life insurance, as if the property were trading stock.
Deﬁned in this Act: ﬁnancial arrangement, life insurance, life insurer, property, trading stock Compare: 2004 No 35 s GD 7 GC 4 Disposals and acquisitions of FIF attributing interests When subsection (2) applies Subsection (2) applies if— (a) a person disposes of an attributing interest in a foreign investment fund (FIF); and they calculate their FIF income or loss from the interest for the period ending with the disposal using the com- parative value method, deemed rate of return method, the fair dividend rate method, or the cost method; and the consideration, if any, for the disposal is below the market value of the interest at the time.
(b) (c) Disposal treated as at market value The person is treated as having disposed of the interest for an amount equal to its market value at the time.
When subsection (4) applies Subsection (4) applies if— (a) (b) a person acquires an attributing interest in a FIF; and they calculate their FIF income or loss from the interest for the period after the acquisition using the compara- (1) (2) (3) 1430 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GC 5 tive value method, deemed rate of return method, the fair dividend rate method, or the cost method; and the consideration, if any, for the acquisition is not equal to the market value of the interest at the time.
(c) Acquisition treated as at market value The person is treated as having acquired the interest for an amount equal to its market value at the time.
Deﬁned in this Act: attributing interest, comparative value method, cost method, deemed rate of return method, fair dividend rate method, FIF, FIF income, FIF loss Compare: 2004 No 35 s GD 14 (4) GC 4B Disposals of ETS units at below market value [Repealed] Section GC 4B: repealed (with effect on 26 September 2008), on 6 October 2009, by section 244 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section GC 4B: inserted, on 26 September 2008, by section 75 of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).

GC 5 Leases for inadequate rent Leases (1) (2) When this section applies This section applies if and to the extent to which— (a) (b) a property is leased; and the lease is 1 of the types referred to in subsection (2); and the lessee uses the property in deriving income; and no rent is payable, or the Commissioner considers that the rent is less than adequate.
(c) (d) Types of leases The following types of leases are subject to this section: (a) (b) (c) a lease by a company: a lease by a person to a relative or a related company: a lease by 2 or more persons to a relative or a related company of any of those persons: a lease by a partnership to a relative of a partner or a related company of the partnership.
(d) 1431 Part G s GC 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) Lease treated as having adequate rent The lessee is treated as paying, and the lessor is treated as de- riving as income, an adequate rent determined by the Com- missioner.
Timing The adequate rent is treated as— (a) paid on the rent payment dates set out in the lease, if any; and paid on a daily basis on each day of the lease term, if there are no rent payment dates; and income derived by the lessor on the date on which it is treated as being paid; and accruing on a daily basis.
(b) (c) (d) Some deﬁnitions In this section,— lease means a tenancy of any duration, including a sublease or bailment related company means a company that is under the control of,— (a) in the case of a single lessor, the lessor, 1 or more rela- tives of the lessor, or a combination of them: in the case of multiple lessors, including a partnership, any of the lessors, 1 or more relatives of any of the lessors, or a combination of them (b) rent includes a premium or other consideration for the lease.
Deﬁned in this Act: Commissioner, company, income, lease, related company, relative, rent Compare: 2004 No 35 s GD 10 Transfer pricing arrangements GC 6 Purpose of rules and nature of arrangements Purpose of rules The purpose of this section and sections GC 7 to GC 14 is to substitute an arm’s length consideration in the calculation of a person’s net income if the person’s net income is reduced by the terms of a cross-border arrangement with an associated person for the acquisition or supply of goods, services, or any- thing else.
(1) 1432 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GC 6 (2) (3) (4) What is a transfer pricing arrangement?

An arrangement is a transfer pricing arrangement if— (a) the arrangement involves the supply and acquisition of goods, services, money, other intangible property, or anything else; and the supplier and acquirer are associated persons; and the arrangement is a cross-border arrangement under subsection (3).
(b) (c) When arrangement is cross-border arrangement An arrangement is a cross-border arrangement if the require- ments of any of the following paragraphs is met: (a) the supplier and acquirer are a New Zealand resident and non-resident, unless the requirements of both of the following subparagraphs are met: (i) the non-resident enters into the arrangement for the purposes of a business carried on by the non- resident in New Zealand through a ﬁxed estab- lishment in New Zealand: the New Zealand resident has not entered into the arrangement for the purposes of a business carried on by the New Zealand resident outside New Zealand: (ii) (b) (c) the supplier and acquirer are 2 New Zealand residents and either or both enter into the arrangement for the purposes of a business carried on by the person outside New Zealand: the supplier and acquirer are 2 non-residents, unless each enters into the arrangement for the purposes of a business carried on by the person in New Zealand through a ﬁxed establishment in New Zealand.
Application of sections Section GC 7, GC 8, GC 9, or GC 10 can apply to an ar- rangement under section GB 2 (Arrangements involving trans- fer pricing).
Deﬁned in this Act: acquisition, arrangement, associated person, ﬁxed estab- lishment, net income, New Zealand, New Zealand resident, non-resident, sup- ply, transfer pricing arrangement Compare: 2004 No 35 s GD 13(1), (2) 1433 Part G s GC 7 Income Tax Act 2007 Reprinted as at 1 January 2010 GC 7 Excess amount payable by person If the amount of consideration payable by a person (the tax- payer) under a transfer pricing arrangement is more than an arm’s length amount, an amount equal to the arm’s length amount is treated as the amount payable by the taxpayer for the purposes of the calculation of their income tax liability for a tax year.
Deﬁned in this Act: amount, arrangement, income tax liability, tax year, tax- payer, transfer pricing arrangement Compare: 2004 No 35 s GD 13(3) GC 8 Insufﬁcient amount receivable by person Amount receivable If the amount of consideration receivable by a person (the taxpayer) under a transfer pricing arrangement is less than an arm’s length amount, an amount equal to the arm’s length amount is treated as the amount receivable by the taxpayer for each of the following purposes: (a) the calculation of their income tax liability for a tax year: [Repealed] the determination of the obligation of another person to withhold under Part R (General collection rules) from the amount.
(b) (c) Non-resident’s exemption: deduction to payer This section does not apply when— (a) the taxpayer is neither resident in New Zealand nor en- tering into the arrangement for the purposes of a busi- ness carried on in New Zealand through a ﬁxed estab- lishment in New Zealand; and the amount receivable is a deduction of the other party or, in the case of an interest-free loan, would be a de- duction but for the application of subpart FE (Interest apportionment on thin capitalisation) if an arm’s length amount of interest were substituted; and the amount receivable is interest, royalties, or an insur- ance premium to which section YD 8 (Apportionment of premiums derived by non-resident general insurers) applies.
(b) (c) (1) (2) 1434 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GC 9 (3) Non-resident’s exemption: ﬁxed-rate share dividend This section does not apply if both of the following require- ments are met: (a) the taxpayer is neither resident in New Zealand nor en- tering into the arrangement for the purposes of a busi- ness carried on in New Zealand through a ﬁxed estab- lishment in New Zealand: the amount is a dividend receivable on a ﬁxed-rate share.
(b) Deﬁned in this Act: amount, arrangement, deduction, dividend, ﬁxed establish- ment, ﬁxed-rate share, income tax liability, interest, resident in New Zealand, royalty, tax year, taxpayer, transfer pricing arrangement Compare: 2004 No 35 s GD 13(4), (5) Section GC 8(1)(b): repealed (with effect on 30 June 2009), on 6 October 2009, by section 246(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
GC 9 Compensating arrangement: person paying less than arm’s length amount (1) When this section applies This section applies when— (a) (b) (c) (d) a person (the taxpayer) is a party to a transfer pricing arrangement with another person; and an adjustment either— (i) is made for an income year under section GC 7 to an amount payable by the tax- payer under the transfer pricing arrangement; or section GC 8 to an amount receivable by the taxpayer under the transfer pricing arrangement; and (ii) an amount of consideration payable by the taxpayer in the same income year, or in the preceding or next in- come year, for an acquisition (the compensating acqui- sition arrangement) from the same person is less than an arm’s length amount; and either— (i) the transfer pricing arrangement involves goods, services, money, other intangible property, or anything else of the same type as that acquired in the compensating acquisition arrangement; or 1435 Part G s GC 10 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) the amount of consideration actually payable or receivable in the transfer pricing arrangement is set having regard to the amount of consideration payable under the compensating acquisition ar- rangement.
(2) Paying arm’s length amount For the purposes of calculating the taxpayer’s income tax li- ability, the amount paid by them in the compensating acquisi- tion arrangement is treated for the corresponding tax year as an amount equal to the arm’s length amount determined under section GC 13.
Deﬁned in this Act: acquisition, amount, arrangement, income tax liability, tax year, transfer pricing arrangement Compare: 2004 No 35 s GD 13(10) GC 10 Compensating arrangement: person receiving more than arm’s length amount When this section applies This section applies when— (a) (b) (c) (d) (ii) a person (the taxpayer) is a party to a transfer pricing arrangement with another person; and an adjustment is made for a tax year under either— (i) section GC 7 to an amount payable by the tax- payer under the transfer pricing arrangement; or section GC 8 to an amount receivable by the taxpayer under the transfer pricing arrangement: an amount of consideration receivable by the taxpayer in the same tax year, or the preceding or next tax year, for a supply (the compensating supply arrangement) to the same person is more than an arm’s length amount: either— (i) the transfer pricing arrangement involves goods, services, money, other intangible property, or anything else of the same type as that acquired in the compensating supply arrangement; or the amount of consideration actually payable or receivable in the transfer pricing arrangement is set having regard to the amount of consider- (ii) (1) 1436 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GC 11 ation receivable under the compensating supply arrangement.
(2) Receiving arm’s length amount The amount received by the taxpayer in the compensating sup- ply arrangement is treated as being an amount equal to the arm’s length amount determined under section GC 13, for each of the following purposes: (a) the calculation of their income tax liability for a tax year: [Repealed] the determination of the obligation of another person to withhold under Part R (General collection rules) from the amount.
(b) (c) Deﬁned in this Act: amount, arrangement, income tax liability, supply, tax year, transfer pricing arrangement Compare: 2004 No 35 s GD 13(10) Section GC 10(2)(b): repealed (with effect on 30 June 2009), on 6 October 2009, by section 247(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
GC 11 Requests for matching treatment (1) When this section applies This section applies when— (a) an arm’s length amount of consideration is substituted under section GC 7 or GC 8 in relation to a transfer pricing arrangement entered into by a person (the tax- payer); and the other party to the arrangement or, if the other party is a controlled foreign company (CFC), a person with an income interest in the CFC, applies to the Commis- sioner in writing within 6 months after an assessment is made for the taxpayer which reﬂects the substitution; and the Commissioner considers it is fair and reasonable to apply subsection (2), having regard to an adjustment made under a double tax agreement or any other matter; and the Commissioner has notiﬁed the other party.
(b) (c) (d) 1437 Part G s GC 12 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (b) Substitution applying for other party The substitution applies for the purposes of the application of this Act to the other party— (a) excluding the determination of the extent to which the other party has derived or been paid a dividend; and including, when the other party is a CFC, the calculation of net attributable CFC income or net attributable CFC loss in relation to the other party, and the resultant cal- culation of the attributed CFC income or an attributed CFC loss or attributed CFC net loss of a person.
Deﬁned in this Act: amount, arrangement, assessment, attributed CFC income, attributed CFC loss, attributed CFC net loss, CFC, Commissioner, dividend, double tax agreement, income interest, net attributable CFC income, net at- tributable CFC loss, taxpayer, transfer pricing arrangement Compare: 2004 No 35 s GD 13(11) Section GC 11(2)(b): substituted (with effect on 30 June 2009), on 6 October 2009, by section 248(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section GC 11 list of deﬁned terms branch equivalent income: repealed (with effect on 30 June 2009), on 6 October 2009, by section 248(2)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section GC 11 list of deﬁned terms branch equivalent loss: repealed (with effect on 30 June 2009), on 6 October 2009, by section 248(2)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section GC 11 list of deﬁned terms net attributable CFC income: inserted (with effect on 30 June 2009), on 6 October 2009, by section 248(2)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section GC 11 list of deﬁned terms net attributable CFC loss: inserted (with effect on 30 June 2009), on 6 October 2009, by section 248(2)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
GC 12 Effect on person’s withholding obligations An adjustment under any of sections GC 7 to GC 10 has no effect on an obligation of the taxpayer to withhold under Part R (General collection rules) in relation to the amount other than to the extent to which section GC 11(2) applies.

Deﬁned in this Act: amount Section GC 12: substituted (with effect on 30 June 2009), on 6 October 2009, by section 249(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1438 Reprinted as at 1 January 2010 Income Tax Act 2007 Part G s GC 13 GC 13 Calculation of arm’s length amounts (1) (2) (3) (4) Use of most reliable measure An arm’s length amount of consideration must be determined by applying whichever 1 or a combination of the methods listed in subsection (2) produces the most reliable measure of the amount that completely independent parties would have agreed upon after real and fully adequate bargaining.
Five available methods The arm’s length amount of consideration must be calculated under any 1 or a combination of— (a) (b) (c) (d) (e) the comparable uncontrolled price method: the resale price method: the cost plus method: the proﬁt split method: the comparable proﬁts methods.
Criteria for choice and application of method The choice and application of a method or methods must be made having regard to each of the following factors: (a) the degree of comparability between the uncontrolled transactions used for comparison and the controlled transactions of the taxpayer: the completeness and accuracy of the data relied on: the reliability of all assumptions: the sensitivity of a result to possible deﬁciencies in the data and assumptions.
(b) (c) (d) Initial determination by the taxpayer The arm’s length amount of consideration is determined by the taxpayer under subsections (1) to (3), and the amount deter- mined is the arm’s length amount for the purposes of sections GC 7 to GC 11, unless either— (a) the Commissioner can demonstrate that another amount is a more reliable measure of the arm’s length amount; or the taxpayer has not co-operated with the Commis- sioner in the Commissioner’s administration of sections GC 6 to GC 14 in relation to the taxpayer, and the non-co-operation has materially affected the Commis- sioner in that administration.
(b) 1439 Part G s GC 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (5) Commissioner’s determination If subsection (4)(a) or (b) applies, the Commissioner deter- mines the amount under subsections (1) to (3) for the purposes of sections GC 7 to GC 11.
Deﬁned in this Act: amount, Commissioner Compare: 2004 No 35 s GD 13(6)–(9) GC 14 Deﬁnitions for sections GC 6 to GC 13 In sections GC 6 to GC 13,— acquisition— (a) (b) includes obtaining the availability of anything; but does not include the mere receipt or retention by a com- pany of consideration for the issue of a share, unless the share is a ﬁxed-rate share amount includes zero supply— (a) (b) includes making anything available; but does not include the mere payment, and subsequent con- tinuing making available, by a person to a company of consideration for the issue of a share, unless the share is a ﬁxed-rate share.
Deﬁned in this Act: acquisition, amount, company, ﬁxed-rate share, share, sup- ply Compare: 2004 No 35 s GD 13(13) Subpart GZ—Terminating provisions GZ 1 Limitation on section GB 20: petroleum mining arrangements Section GB 20 (Arrangements involving petroleum mining) does not apply to an arrangement if— (a) the petroleum mining asset was disposed of before 1 July 1992: the petroleum exploration expenditure was incurred be- fore 1 July 1992: the farm-out arrangement was entered into before 16 December 1991.
(b) (c) Deﬁned in this Act: arrangement, dispose, farm-out arrangement, petroleum mining asset, petroleum mining expenditure Compare: 2004 No 35 s GD 12(1) 1440 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 1 GZ 2 Arrangements involving cancellation of conduit tax relief credits (1) (2) What this section applies to This section applies to a company with a CTRA that enters an arrangement if— (a) the arrangement involves transactions— (i) undertaken between 4 December 2007 and the beginning of the ﬁrst affected income year; and giving rise to CTR credits in the CTRA; and (ii) a purpose of the arrangement is to produce for a New Zealand resident, other than the company with the CTRA or a CTR holding company for that company, a beneﬁt— (i) (ii) under a taxation law; and relating to the CTR credits.
(b) Income tax liability The company’s income tax liability for the income year of the arrangement is increased by the amount of CTR credits re- ferred to in subsection (1)(a)(ii).

Deﬁned in this Act: amount, arrangement, company, CTR credit, CTR holding company, CTRA, income year, New Zealand resident, taxation law Section GZ 2: added (with effect on 30 June 2009), on 6 October 2009, by section 250(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Part H Taxation of certain entities Subpart HA—Qualifying companies (QC) and loss-attributing qualifying companies (LAQC) Introductory provisions HA 1 What this subpart does (1) Distributing proﬁts and attributing tax losses The rules in this subpart allow a company to choose, for tax- ation purposes,— (a) to have a distribution of proﬁts to shareholders imputed, or tax paid to the extent to which it is not imputed; and 1441 Part H s HA 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) (5) (6) (b) when it has only 1 class of shares, to have tax losses attributed to shareholders in a similar way to those of a partnership.
Requirements for qualifying companies A qualifying company must meet the requirements of sections HA 5 to HA 9, and must maintain the conditions set out in section HA 4.

Requirements for loss-attributing qualifying companies A loss-attributing qualifying company must be a qualifying company, and must meet the shareholding requirements of sec- tion HA 10.

Income year or part-year In this subpart, a reference to an income year includes a refer- ence to part of an income year.
Elections required For a company to be a qualifying company or a loss-attribut- ing qualifying company, all the directors of the company, and every shareholder in the company with legal capacity, must sign an election referred to in section HA 5.

An exception ap- plies for a minority shareholder in the situation described in section HA 29.
Shareholder’s personal liability A shareholder who makes an election referred to in subsection (5) must agree to take personal liability to the extent described in section HA 8.
Deﬁned in this Act: company, director, income year, loss-attributing qualifying company, pay, qualifying company, share, shareholder, tax, tax loss Compare: 2004 No 35 ss HG 1(c), (d), HG 3(1), HG 4(1), HG 14 HA 2 Meaning of qualifying company In this Act, a qualifying company means a company other than a unit trust that, for the whole of an income year, meets the requirements of sections HA 5 to HA 9.
Deﬁned in this Act: company, income year, qualifying company, unit trust Compare: 2004 No 35 s OB 3(1) 1442 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 5 HA 3 Meaning of loss-attributing qualifying company In this Act, a loss-attributing qualifying company (LAQC) means a qualifying company that, for the whole of an income year, meets the requirements of section HA 10.

If section HA 12 applies, the company is not eligible to be an LAQC.
Deﬁned in this Act: income year, LAQC, loss-attributing qualifying company, qualifying company Compare: 2004 No 35 s HG 14 HA 4 Conditions applying (1) (2) (3) Becoming and continuing as qualifying company The requirements of sections HA 5 to HA 9 are precondi- tions of, and ongoing conditions for, qualifying companies and LAQCs.

For a company to become and to continue as a qualifying company, the requirements of those sections must be met.
Losing status Sections HA 11 and HA 12 apply in relation to a failure to maintain the requirements and avoidance arrangements.

Avoidance Section GB 6 (Arrangements involving qualifying compan- ies) may apply to treat a company as not being a qualifying company.
Deﬁned in this Act: arrangement, company, LAQC, qualifying company Compare: 2004 No 35 ss HG 7, HG 14(d) Qualifying company status HA 5 Elections to become qualifying company (1) Making elections A company that meets the requirements of sections HA 6 to HA 9 may be a qualifying company or an LAQC only if all the directors of the company and every shareholder in the com- pany with legal capacity, choose that the company is to become a qualifying company.
Every director and every shareholder with legal capacity must sign a notice of election and give it to the Commissioner.

1443 Part H s HA 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) Elections remaining in effect The elections referred to in subsection (1) must remain in ef- fect and must not have been revoked before the end of the rele- vant income year.
Director at time For the purposes of an election, a person is considered a dir- ector of a company if they hold the ofﬁce at the time the notice is provided.

Elections The elections referred to in this section are dealt with in sec- tions HA 28 to HA 39.
Deﬁned in this Act: Commissioner, company, director, income year, LAQC, notice, qualifying company, shareholder Compare: 2004 No 35 ss HG 3(1), HG 4(1), HG 14(a), (b), OB 3(1)(f) HA 6 Corporate requirements Requirements A qualifying company must, in an income year,— (a) have 5 or fewer shareholders who meet the requirements of section HA 7; or be a ﬂat-owning company.
(b) Exclusions A company is not eligible to be a qualifying company if, at any time in an income year, it is— (a) (b) a company that is not resident in New Zealand; or a company that is resident in New Zealand but is treated under and for the purposes of a double tax agreement, as not resident in New Zealand; or no longer a qualifying company under section HA 11(4) because its status as an LAQC has ended.
(c) Deﬁned in this Act: company, double tax agreement, ﬂat-owning company, income year, LAQC, qualifying company, resident in New Zealand, shareholder Compare: 2004 No 35 ss HG 1(a), (b), OB 1 foreign company, OB 3(1)(a), (b), (g) (1) (2) 1444 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 7 HA 7 Shareholding requirements (1) (2) Natural persons, certain trustees, and qualifying companies A shareholder in a qualifying company must be 1 of the fol- lowing: (a) (b) a natural person other than a trustee; or a trustee of a trust, but only if subsection (2) applies in relation to dividends derived by the trustee; or another qualifying company.
(c) Dividends derived by trustees For the purposes of subsection (1)(b), all dividends that the trustee of a trust derives from a qualifying company in an in- come year must be beneﬁciary income of 1 or more persons who are not trustees or companies other than qualifying com- panies.

However, this subsection does not apply to non-cash dividends other than taxable bonus issues.
Special shareholding rules (3) When the shares in a qualifying company that has 5 or fewer shareholders are held by relatives, other companies, and trustees, the following special rules apply: (a) (b) (c) if a shareholder in a qualifying company is connected within the ﬁrst degree of relationship to another share- holder in the company by either blood relationship, mar- riage, civil union or de facto relationship, or adoption, they are treated as a single shareholder, and this treat- ment continues while they remain a shareholder in the company despite any later death or dissolution: shares in a qualifying company that are held by another company are treated as held by the shareholders in that other company: if a shareholder in a qualifying company is a trustee, the shareholders are counted, without the trustee, as the larger of the following: (i) the group who signed the election as shareholder; or the group who derived beneﬁciary income from dividends from the qualifying company in the period between the ﬁrst day of the 1991–92 in- come year and the time of counting.
(ii) 1445 Part H s HA 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Shareholder continuity requirements For the application of shareholder continuity requirements to the memorandum accounts of qualifying companies, see sec- tion OA 8(3B) (Shareholder continuity requirements).
Deﬁned in this Act: beneﬁciary income, company, dividend, income year, memorandum account, non-cash dividend, qualifying company, relative, share, shareholder, taxable bonus issue, trustee Compare: 2004 No 35 s OB 3(1)(c), (3) Section HA 7(4) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 251(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HA 7(4): added (with effect on 1 April 2008), on 6 October 2009, by section 251(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section HA 7 list of deﬁned terms memorandum account: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 251(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HA 8 Shareholders’ personal liability Agreement required for election A person making an election as shareholder as described in section HA 5 must agree for each income year in which the election is in effect, to take personal liability on the basis of their effective interest in the company— (a) for their share of the company’s income tax liability for the income year; and if the company has made an election as shareholder in another company, for any income tax payable in relation to that other company for the income year.
(b) Trustee shareholders A person making an election as trustee under section HA 28 must agree to take personal liability under subsection (1), modiﬁed as follows: (a) the trustee together with 1 or more beneﬁciaries who have legal capacity must make the election; and the personal liability as trustee is limited to the extent of the net assets of the trust; and if the election is made for a majority shareholding under section HA 29, the personal liability includes the effect- ive interests of the minority shareholding.
(b) (c) (1) (2) 1446 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 9 (3) (4) (5) Majority shareholders One or more persons whose effective interests in a company at a particular time add up to 50% or more, may make an elec- tion under section HA 29, agreeing to take personal liability described in subsection (1) in relation to the effective interests in the company of the minority shareholding.
Beneﬁciaries In subsection (1), the person includes a beneﬁciary who makes an election under section HA 28 or a person who assumes li- ability on their behalf.

Nature of liability In sections HA 13 to HA 27, when more than 1 person agrees to take personal liability as described in subsection (3) for a percentage of an income tax liability or for income tax payable in an income year, the liability is joint and several.
Deﬁned in this Act: company, effective interest, income tax, income tax liabil- ity, income year, pay, shareholder, trustee Compare: 2004 No 35 s HG 4(1)–(3) HA 8B No CFC income interests or FIF direct income interests of 10% or more A qualifying company must not have— income interests in a CFC: (a) attributing interests in a FIF that are a direct income (b) interest of 10% or more.
Deﬁned in this Act: attributing interest, CFC, direct income interest, FIF, in- come interest, qualifying company Section HA 8B: inserted (with effect on 30 June 2009), on 6 October 2009, by section 252(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HA 9 Limit on foreign non-dividend income (1) Dollar limit The foreign non-dividend income of a qualifying company in an income year must be no more than $10,000 after subtracting the lesser of— (a) any income under section CC 3 (Financial arrange- ments); or 1447 Part H s HA 10 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (b) 10% of the gross income of the company for the income year.
Change in threshold The Governor-General may make an Order in Council increas- ing the sum set out in subsection (1).

The order may apply— from the start of the income year in which it is made; or (a) to amounts of income derived after the date on which (b) the order is made.
Deﬁned in this Act: amount, foreign non-dividend income, gross, income, in- come year, qualifying company Compare: 2004 No 35 s OB 3(1)(d), (4) Section HA 9(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 253(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HA 10 Nature of LAQC shares All shares in an LAQC must carry— (a) the same shareholder decision-making rights on— (i) (ii) (iii) (iv) the distributions to be made by the company; and the company’s constitution; and varying the capital of the company; and appointing or electing directors of the company; and (b) the same rights when the company distributes its proﬁts or its assets, if the company acquires, redeems, or can- cels its shares, or in another way reduces or returns its share capital, whether on liquidation or not.
Deﬁned in this Act: cancellation, director, liquidation, LAQC, share, share- holder decision-making rights Compare: 2004 No 35 s HG 14(a), (b) HA 11 When requirements no longer met When this section applies This section applies when, through changed circumstances, a qualifying company no longer meets the requirements of sec- tions HA 5 to HA 9.
Status at end The company’s status as a qualifying company is ended, whether or not it is, or could be, known at the time the (1) (2) 1448 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 11 (3) (4) (5) circumstances arise that the company no longer meets the requirements.

Qualifying companies The company’s status as a qualifying company is treated as ended from the start of the income year in which the change of circumstances occurs.

Subsection (6) overrides this subsec- tion.


LAQCs If the company is an LAQC in an income year, but does not meet the requirements for the next income year, its status as a qualifying company is treated as ended from the start of that next income year.

However, the company may become a qualifying company again if it later meets the requirements.
Distribution of dividends Despite subsection (1), a company’s status as a qualifying company is not ended merely because it does not comply with section HA 7(2) when— (a) all dividends that can, under general law, be distributed by the trustee are beneﬁciary income of a beneﬁciary other than— (i) (ii) a trustee beneﬁciary; or a beneﬁciary that is a company other than a quali- fying company; and (b) some of the dividends derived by the trustee from the qualifying company have vested or have been dis- tributed as beneﬁciary income of a beneﬁciary other than— (i) (ii) a trustee beneﬁciary; or a beneﬁciary that is a company other than a quali- fying company.
(6) Deferring date On an application by a qualifying company, the Commissioner may defer the date on which the company’s status ends to the start of a later income year if— (a) the company did not know, and could not reasonably be expected to have known, at the time the circumstances arose that it no longer met the requirements; and 1449 Part H s HA 12 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) in the circumstances, it would be an unduly harsh or inappropriate outcome.
(7) (8) Examples for subsection (6)(a) Examples of the circumstances that may apply for the pur- poses of subsection (6)(a) are a reasonable expectation or be- lief that— (a) the company would continue to meet the requirements through an extension under section HA 34, HA 35, or HA 37; or an amount of foreign non-dividend income that the company derives would not breach the threshold in section HA 9; or the dividends referred to in section HA 7(2) would be distributed as beneﬁciary income.
(b) (c) (b) Examples for subsection (6)(b) Examples of the circumstances that may apply for the purposes of subsection (6)(b) are— (a) the length of time between the start of the income year and the date of the change in circumstances: the length of time between the date of the change in circumstances and the date when the company knew, or could reasonably be expected to have known, that the requirements were not met: the kinds of transactions that the company made during the periods of time described in paragraphs (a) and (b).
Deﬁned in this Act: amount, beneﬁciary income, Commissioner, company, dividend, foreign non-dividend income, income year, LAQC, qualifying com- pany, trustee Compare: 2004 No 35 ss HG 7, HG 18, OB 3(3A) (c) Section HA 11(5): substituted (with effect on 1 April 2008), on 6 October 2009, by section 254(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HA 12 Avoidance arrangements (1) When this section applies This section applies in an income year in which a company is an LAQC.

1450 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 14 (2) (3) Failure to meet requirements If a share in the company is or has been part of an arrangement whose purpose is to defeat the intent and application of the rules in this subpart, the company is no longer eligible to be an LAQC.
Series of arrangements, and 1 among other purposes In subsection (2), the arrangement referred to— (a) includes a series of related or connected arrangements; and (b) may have more than 1 purpose, and it is sufﬁcient that 1 purpose among those other purposes has the effect described.
Deﬁned in this Act: arrangement, company, income year, LAQC, share Compare: 2004 No 35 s HG 14(d) Treatment of proﬁts, dividends, and tax losses HA 13 Qualifying companies’ distributions A distribution that is a transfer of value to a shareholder of a qualifying company must be treated in the way set out in sections HA 14 to HA 18.
Deﬁned in this Act: qualifying company, shareholder, transfer of value Compare: 2004 No 35 s HG 1(c) HA 14 Dividends paid by qualifying companies (1) (2) (3) When this section applies This section applies when a qualifying company pays a divi- dend to a person resident in New Zealand.

General treatment The dividend is exempt income of the person under section CW 15 (Dividends paid by qualifying companies) to the extent to which it is more than a fully imputed distribution.
When shareholder has non-standard balance date If the person has a non-standard balance date and the dividend is derived after the end of the tax year but before their balance date, the dividend is allocated to the day after the balance date.

1451 Part H s HA 15 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) No resident passive income The dividend does not constitute resident passive income.
Deﬁned in this Act: dividend, exempt income, fully imputed, non-standard bal- ance date, pay, qualifying company, resident in New Zealand, resident passive income, shareholder, tax year Compare: 2004 No 35 ss HG 9(1), HG 13(1) Section HA 14(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 255(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HA 14 list of deﬁned terms fully imputed: inserted (with effect on 1 April 2008), on 6 October 2009, by section 255(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

HA 15 Fully imputed distributions When this section applies This section applies when a qualifying company with an im- putation credit account or foreign dividend payment (FDP) ac- count pays a dividend.
However, this section does not apply to a non-cash dividend other than a taxable bonus issue.
Calculating amount of fully imputed distribution The amount of a fully imputed distribution is calculated using the formula— Deﬁnition of items in formula In the formula in subsection (2), — (a) (b) (c) attached imputation credit is the amount determined under subsection (4), and the amount is zero if no im- putation credit is attached: attached FDP credit is the amount determined under subsection (5), and the amount is zero if no FDP credit is attached: tax rate is the basic rate of income tax set out in sched- ule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) at the time the shareholder derives the dividend, modiﬁed as applicable by section OZ 14 (Dividends from quali- fying companies).
(1) (2) (3) 1452 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 15 (4) (5) ICA companies A qualifying company that is an imputation credit account (ICA) company is treated as having attached an imputation credit to the dividend.
The amount of the imputation credit is the lesser of— (a) the maximum imputation credit that may be attached to the dividend under section OA 18 (Calculation of maximum permitted ratios) modiﬁed as applicable by section OZ 14; and an amount calculated using the formula in subsection (6).

(b) FDPA companies A qualifying company that is a foreign dividend payment ac- count (FDPA) company is treated as having attached a FDP credit to the dividend.
The amount of the FDP credit is the lesser of— (a) the maximum FDP credit that may be attached to the dividend under section OA 18, taking into account any imputation credit attached to the dividend under subsec- tion (4) modiﬁed as applicable by section OZ 14; and an amount calculated using the formula in subsection (6).
(b) Formula The formula referred to in subsections (4) and (5) is— (6) (7) Deﬁnition of items in formula In the formula in subsection (6),— (a) attached credits is the balance in the company’s im- putation credit account or FDP account, as applicable, on the last day of the tax year in which the dividend is paid before a debit is made for any imputation credits or FDP credits, as applicable, that are attached: amount of the dividend is the amount before any im- putation credits or FDP credits, as applicable, are at- tached: amount paid before credits attached is the total amount of dividends, excluding non-cash dividends (b) (c) 1453 Part H s HA 16 Income Tax Act 2007 Reprinted as at 1 January 2010 (8) (9) other than taxable bonus issues, paid by the company during the tax year before any imputation credits or FDP credits, as applicable, are attached.
Relationship with imputation rules and FDP rules An imputation credit or an FDP credit may not be attached to a dividend by a qualifying company except under this section.

Relationship with sections HA 14 and HA 16 If part of the dividend is exempt income under sections HA 14 and HA 16, an imputation credit or FDP credit is treated as attached to the part that is not exempt income.
Deﬁned in this Act: amount, dividend, exempt income, FDP, FDP account, FDP credit, FDP rules, FDPA company, ICA company, imputation credit, imputation credit account, imputation rules, income tax, income year, non-cash dividend, pay, qualifying company, resident in New Zealand, shareholder, taxable bonus issue, tax year Compare: 2004 No 35 s HG 13(1)–(4) Section HA 15(1): amended (with effect on 1 April 2008), on 6 October 2009, by section 256(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HA 15(3)(c): amended, on 1 April 2008, by section 409(1) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HA 15(3)(c): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HA 15(4)(a): amended, on 1 April 2008, by section 409(2) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HA 15(5)(a): amended, on 1 April 2008, by section 409(3) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HA 15(9) heading: substituted (with effect on 1 April 2008), on 6 Oc- tober 2009, by section 256(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).
Section HA 15(9): substituted (with effect on 1 April 2008), on 6 October 2009, by section 256(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HA 16 Dividends paid by qualifying companies to trustee shareholders When this section applies This section applies when a dividend referred to in section HA 14(2) is derived by a trustee to the extent to which the dividend is exempt income of the trustee under section CW 15(1) (Divi- dends paid by qualifying companies).
(1) 1454 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 18 (2) Exempt income To the extent to which the dividend is also beneﬁciary income of a beneﬁciary resident in New Zealand, the dividend is ex- empt income of the beneﬁciary under section CW 15(2).
Deﬁned in this Act: dividend, exempt income, resident in New Zealand, trustee Compare: 2004 No 35 s HG 13(1)(a)(i), (1A) Section HA 16: substituted (with effect on 1 April 2008), on 6 October 2009, by section 257(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HA 17 Dividends derived by qualifying companies (1) (2) What this section applies to This section applies to a dividend— (a) (b) that a company derives after it becomes a qualifying company; and to which section CW 10 (Dividend within New Zealand wholly-owned group) or CW 11 (Dividend of conduit tax relief holding company) applies.
Dividend not exempt income The dividend is not exempt income under sections CW 10 and CW 11, except to the extent to which section CW 9 (Dividend derived by company from overseas) applies to it.
Deﬁned in this Act: company, dividend, exempt income, qualifying company Compare: 2004 No 35 ss HG 10(a), HG 13(1)(aa) HA 18 Treatment of dividends when qualifying company status ends (1) (2) (3) When this section applies This section applies when a company’s status as a qualifying company ends under section HA 11(1).

Dividends distributed in tax year Section HA 15 applies to a dividend distributed in the period of a tax year from the ﬁrst day to the day before the date on which the status ends.
References in that section to a tax year should be read as references to that period of the year.
Group companies: imputation credit accounts On the day before the date on which the status ends, the com- pany’s imputation credit account is debited under section OB 1455 Part H s HA 19 Income Tax Act 2007 Reprinted as at 1 January 2010 41 (ICA debit for loss of shareholder continuity) by the lesser of— (a) the balance of the credit account on that day after any credits are attached under section HA 15; and the largest debit to the credit account that would have arisen before that day if section OB 41 had applied.
(b) (4) Group companies: FDP account On the day before the date on which the status ends, the com- pany’s FDP account is debited under section OC 24 (FDPA debit for loss of shareholder continuity) by the lesser of— (a) the balance of the credit account on that day after any credits are attached under section HA 15; and the largest debit to the credit account that would have arisen before that day if section OC 24 had applied.
(b) Deﬁned in this Act: company, dividend, FDP account, imputation credit ac- count, qualifying company, tax year Compare: 2004 No 35 s HG 13(6) HA 19 Credit accounts and dividend statements When this section applies This section applies when a qualifying company pays a divi- dend that is treated either as a fully imputed distribution under section HA 15 or as exempt income under sections HA 14 and HA 16. Credit accounts For the purposes of sections OB 30 to OB 59 (which relate to imputation debits) and OC 13 to OC 26 (which relate to FDP debits), if an imputation credit or an FDP credit is at- tached to the dividend, the amount of the credit is debited to the company’s imputation credit account or FDP account, as applicable.
The debit arises on the day the company pays the dividend.
Dividend statements For all dividends, whether or not credits have been attached, the company must complete the following statements detailing the extent to which the dividends are assessable income or exempt income: (1) (2) (3) 1456 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 21 (4) (5) (a) (b) a company dividend statement under section 67(1) of the Tax Administration Act 1994; and a shareholder dividend statement under section 29 of that Act.
Date for completing statements The company must complete the statements in subsection (3) by 31 May after the end of the tax year in which the dividends were paid.

Non-cash dividends In addition to the information required in a shareholder divi- dend statement, if a shareholder asks the company to include in the statement the amount of a non-cash dividend that the com- pany has paid them in the tax year, the company must provide the information.
Deﬁned in this Act: amount, assessable income, company dividend statement, dividend, exempt income, FDP account, FDP credit, fully imputed, imputation credit, imputation credit account, non-cash dividend, pay, qualifying company, shareholder, shareholder dividend statement, tax year Compare: 2004 No 35 s HG 13(5) Section HA 19(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 258(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HA 19 list of deﬁned terms fully imputed: inserted (with effect on 1 April 2008), on 6 October 2009, by section 258(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

HA 20 Attribution of tax losses A tax loss of an LAQC is treated as a loss incurred by the shareholders of the company under sections HA 24 to HA 27.
Deﬁned in this Act: LAQC, shareholder, tax loss Compare: 2004 No 35 ss HG 1(d), HG 9(2), HG 16 HA 21 Loss balances not carried forward In an income year in which a company that is not a qualifying company becomes a qualifying company, subparts IA (Gen- eral rules for tax losses) and IQ (Attributed controlled foreign company net losses and foreign investment fund net losses) do 1457 Part H s HA 22 Income Tax Act 2007 Reprinted as at 1 January 2010 not apply to carry forward a loss balance of the company to the income year or to later income years.
Deﬁned in this Act: company, income year, loss balance, qualifying company Compare: 2004 No 35 s HG 11(3) Section HA 21: amended (with effect on 1 April 2008), on 7 December 2009, by section 42 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

HA 22 Group companies using tax losses (1) (2) When this section applies This section applies if a qualifying company is in the same group of companies as a company with a tax loss (company A).
When tax losses available The amount of company A’s tax loss is available to the quali- fying company to use under section IA 3(2) (Using tax losses in tax year) only if— (a) (b) company A is also a qualifying company; and the requirements of section IC 5 (Company B using company A’s tax loss) are met.
Deﬁned in this Act: amount, company, group of companies, qualifying com- pany, tax loss Compare: 2004 No 35 s HG 10(b) HA 23 Treatment of tax losses on amalgamation If a company that is not a qualifying company amalgamates with a qualifying company and ends its existence on the amal- gamation, subpart IA (General rules for tax losses) does not apply to carry forward the amalgamating company’s loss bal- ance from earlier income years either to the income year of the amalgamation or to later income years.
Deﬁned in this Act: amalgamating company, amalgamation, company, income year, loss balance, qualifying company, tax loss Compare: 2004 No 35 s HG 11(3A) 1458 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 24 Special tax matters for loss-attributing qualifying companies HA 24 Treatment of tax losses other than certain foreign losses (1) (2) (3) (4) (5) (6) What this section applies to This section applies in a tax year when an LAQC has a tax loss that does not include an attributed controlled foreign company (CFC) net loss or a foreign investment fund (FIF) net loss to which subsection (6) applies.
Calculating amounts for shareholders with effective interests Each shareholder in the company is treated as having incurred an amount of loss calculated using the formula— company’s tax loss × shareholder’s effective interest.

Deﬁnition of items in formula In the formula,— (a) company’s tax loss is the amount of the tax loss of the company for the tax year: shareholder’s effective interest is the effective inter- est of the shareholder in the company for the tax year.
(b) Incurred in deriving income The shareholder’s amount of loss is treated as having been incurred in deriving their assessable income.

Section HA 26 overrides this subsection.

Losses not carried forward If the company has a loss balance remaining for a tax year after the uses described in section IA 3 (Using tax losses in tax year), the balance is not carried forward to the next income year, and HA 21 applies.
Other foreign losses If an election under section HA 25 has not been made in rela- tion to the tax loss then, to the extent to which it is an attributed CFC net loss or a FIF net loss, the amount is treated as if it were the shareholder’s attributed CFC net loss or FIF net loss.
Deﬁned in this Act: amount, assessable income, attributed CFC net loss, effect- ive interest, FIF net loss, income year, LAQC, loss balance, shareholder, tax loss, tax year Compare: 2004 No 35 ss HG 16(1), HG 17(1)(a) 1459 Part H s HA 25 Income Tax Act 2007 Reprinted as at 1 January 2010 HA 25 Treatment of certain foreign losses Choosing not to attribute foreign losses to shareholders On notiﬁcation to the Commissioner, an LAQC may choose to exclude an attributed CFC net loss or a FIF net loss from a tax loss attributed to the company’s shareholders under section HA 24.
Treatment The amount of an attributed CFC net loss or FIF net loss under subsection (1)— (a) may be carried forward under subparts IA and IQ (which relate to the treatment of foreign losses); and is not included in an amount of tax loss attributed to a shareholder under section HA 24; and is not available to be used under section HA 22.
(b) (c) Notice of election For the purposes of subsection (1), every person with legal capacity who is, at the time of notifying the Commissioner, a shareholder in the company must sign the notice of election.

The notice must be given to the Commissioner before the start of the income year in which it is to apply or, if the company has not previously been required to provide a return of income, in the time allowed by section 37 of the Tax Administration Act 1994, for the company’s ﬁrst income year.
When election applies A notice of election under subsection (3) applies in an income year if— (a) it is given to the Commissioner before the start of the income year; and the company remains a qualifying company for the whole of the income year; and no revocation has effect for the income year.

(b) (c) Revoking notice A company may revoke an election made under this section only by giving a notice of revocation to the Commissioner.
Every person with legal capacity who is, at the time of giving the notice, a shareholder in the company must sign the notice of revocation.

(1) (2) (3) (4) (5) 1460 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 26 (6) (7) When revocation takes effect In a notice of revocation, the company may nominate an in- come year that is later than the year of notice as the income year in which the revocation takes effect, and it takes effect at the start of that income year.
If the company does not nom- inate an income year in the notice, the revocation takes effect at the start of the income year in which the Commissioner re- ceives the notice.

When losses carried forward A revocation does not apply to an attributed CFC net loss or a FIF net loss arising in an earlier income year and carried forward under subparts IA and IQ to the income year in which the revocation takes effect.
Deﬁned in this Act: amount, attributed CFC net loss, Commissioner, company, FIF net loss, income year, LAQC, notice, notify, qualifying company, return of income, shareholder, tax loss, tax year Compare: 2004 No 35 s HG 17 HA 26 Attribution when balance dates differ (1) When this section applies This section applies in an income year when— (a) (b) an LAQC has a tax loss; and an amount of the tax loss is attributable to a shareholder under section HA 20, HA 24(2), or HA 25; and the company or the shareholder, or both, have a non- standard balance date for the income year; and the company’s balance date is later than the share- holder’s balance date; and because of the difference in balance dates, the share- holder cannot practically quantify the amount of the tax loss attributable to them in the time allowed by section 37 of the Tax Administration Act 1994 for providing their return of income.
(c) (d) (e) 1461 Part H s HA 27 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) When loss incurred Despite section 38 of the Tax Administration Act 1994, the amount of the shareholder’s tax loss is treated as having been incurred on the ﬁrst day of the next income year.
Deﬁned in this Act: amount, income year, LAQC, non-standard balance date, return of income, shareholder, tax loss Compare: 2004 No 35 s HG 16(2) HA 27 Attribution when loss results in reduction in value of shares (1) (2) When this section applies This section applies in an income year if— (a) (b) an LAQC has a tax loss that causes a reduction in the total value of shares in the company; and a shareholder who has an amount of the tax loss at- tributed to them under section HA 20, HA 24(2), or HA 25, suffers no, or substantially no, corresponding eco- nomic loss arising from any factor including a call op- tion or a put option.
Treatment of shareholder, company, and amount The shareholder is treated for the income year as having no amount of the company’s tax loss component attributed to them.

The amount must not be attributed to another share- holder, and section HA 21 applies.
Deﬁned in this Act: amount, income year, LAQC, share, shareholder, tax loss, tax loss component Compare: 2004 No 35 s HG 16(3), (4) Elections: qualifying companies HA 28 Elections by trustee shareholders If a shareholder referred to in section HA 5 is acting as trustee, they must make an election together with— (a) 1 or more beneﬁciaries of the trust who are natural per- sons with legal capacity; or if no beneﬁciary has legal capacity, a natural person, who may also be the trustee, who assumes liability on behalf of beneﬁciaries.
(b) Deﬁned in this Act: shareholder, trustee Compare: 2004 No 35 s HG 4(2)(a) 1462 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 30 HA 29 Elections by majority shareholders (1) (2) (3) (4) When this section applies This section applies when 1 or more shareholders (the ma- jority) in a company have, at the time of making an election, effective interests in the company of 50% or more, and the ef- fective interest of 1 or more other shareholders (the minority) is less than 50%.
Majority assuming minority’s liability The majority may sign a notice of election advising the Com- missioner that the company is to become a qualifying com- pany.

The notice has effect only if the majority agree to an extension of their personal liability under section HA 8(3).

Minority treated as making election The minority is treated as having made an election under sec- tion HA 5 in relation to their shareholding in the company at the time the election is made.
Election additional An election under this section may be made in addition to any other election a shareholder may make or have made under section HA 5.
Deﬁned in this Act: Commissioner, company, effective interest, notice, quali- fying company, shareholder Compare: 2004 No 35 s HG 4(3) HA 30 When elections take effect (1) (2) When election takes effect In a notice of election made under section HA 5, an income year later than the year of notice may be nominated as the year in which the election is to take effect and, if so, the election takes effect at the start of that income year.
If no income year is nominated in the notice, the election takes effect at the start of the income year after the year of notice.

Shareholder’s election after company becomes qualifying company If a shareholder makes an election when the company is al- ready a qualifying company, the election takes effect when the Commissioner receives it.
1463 Part H s HA 31 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) Company’s ﬁrst income year Despite subsection (1), if the company has not previously been required to provide a return of income, the ﬁrst income year of the company may be nominated as the year in which the election is to take effect.
The Commissioner must be advised of this decision in the notice of election to be received within the time allowed by section 37 of the Tax Administration Act 1994 for providing a return for the company’s ﬁrst income year.

Election in effect until revoked An election remains in effect until revoked.
Deﬁned in this Act: Commissioner, company, income year, notice, qualifying company, return of income, shareholder Compare: 2004 No 35 ss HG 3(2), (3), HG 4(4) HA 31 Revocation of directors’ elections (1) (2) Revoking election An election by directors under section HA 5 may be revoked only by a resolution of the board of directors.

The board must advise the Commissioner of the resolution by providing a no- tice of revocation.
When revocation takes effect The revocation of an election takes effect at the start of the in- come year that the board nominates in the notice of revocation.

If the board has not nominated an income year, the revocation takes effect at the start of the income year in which the notice of revocation is provided.
Deﬁned in this Act: Commissioner, director, income year, notice Compare: 2004 No 35 s HG 3(4), (5) HA 32 Revocation of shareholders’ elections: by notice Notice A person who, as a shareholder in a company, has made an election under section HA 5, may revoke it by notifying both the company and the Commissioner.
When revocation takes effect In the notice, the person may nominate an income year later than the year of notice as the income year in which revocation (1) (2) 1464 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 33 takes effect, and the revocation takes effect at the start of that income year.

If no income year is nominated, it takes effect at the start of the income year in which the Commissioner re- ceives the notice.
(3) (4) Measuring effective interests For measuring the effective interest in the company, as deﬁned in section HA 43 and measured under section HA 44, of the person revoking the election, the revocation takes effect— (a) when both the company and the Commissioner have received the notice; or on a later date nominated in the notice.

(b) Periods of grace and Commissioner’s power to defer Sections HA 11(6) and HA 34 to HA 37 override this section.
Deﬁned in this Act: Commissioner, company, effective interest, income year, notice, notify, shareholder Compare: 2004 No 35 s HG 5(1) HA 33 Revocation of shareholders’ elections: by event (1) Event An election by a person as shareholder under section HA 5 is revoked if an event described in the following paragraphs occurs: (a) (b) the person dies: the person disposes of all of their shares, unless they dispose of them to an existing shareholder in the com- pany for whom an election exists: if sections HA 28 and HA 29 apply, a beneﬁciary ac- quires legal capacity: if section HA 29 applies,— (i) the effective interests of a minority shareholder increase to 50% or more; or the total effective interests of the majority share- holder or shareholders fall below 50%: (ii) (c) (d) (e) for an election made jointly by 2 or more persons, 1 per- son revokes the election or is treated as having revoked the election.
1465 Part H s HA 34 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) When revocation by event takes effect The revocation of an election under this section takes effect at the start of the income year in which the event occurred.

Periods of grace and Commissioner’s power to defer Sections HA 11(6) and HA 34 to HA 37 override this section.
Deﬁned in this Act: Commissioner, company, effective interest, income year, share, shareholder Compare: 2004 No 35 s HG 5(2) HA 34 Period of grace following death of shareholder (1) (2) 12-month period Despite section HA 33(1)(a), a company’s status as a qualify- ing company does not end because a shareholder or another person has died if, within 12 months of the death of the per- son, the company meets the requirements of sections HA 5 to HA 9.
Extension of time The Commissioner may extend the 12-month period referred to in subsection (1) on the application of the company, the personal representative of the deceased person, or a person who is entitled as a shareholder to make an election under HA 5.
Deﬁned in this Act: Commissioner, company, qualifying company, shareholder Compare: 2004 No 35 s HG 6(1) HA 35 Period of grace following revocation of election (1) When this section applies This section applies when a company has been a qualifying company but no longer meets the requirement of section HA 5 through revocation of a shareholder’s election under section HA 32 or HA 33.
But this section does not apply when— (a) the revocation is brought about by the death of a person; or a joint election is revoked.
(b) Revocation by notice (2) When section HA 32 applies, the company’s status as a quali- fying company does not end if, within 63 days of the date on which the company received the notice of revocation, a person 1466 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 37 other than the shareholder who revoked the election makes an election relating to the whole of the relevant shareholding.
Revocation by event (3) When section HA 33 applies, the company’s status as a quali- fying company does not end if, within 63 days of the date when the event that gave rise to the revocation occurred, an election relating to the whole of the relevant shareholding is made or is in effect.

(4) Extension of time In subsections (2) and (3), the Commissioner may extend the 63-day period on the application of the company or a person who is entitled to make an election under section HA 5.
Deﬁned in this Act: Commissioner, company, notice, qualifying company, shareholder Compare: 2004 No 35 s HG 6(2)(a), (b) HA 36 Period of grace following revocation of joint election (1) (2) When this section applies This section applies when a company has been a qualifying company, but an election that shareholders have made jointly has been revoked through an event described in section HA 33.
Cause of revocation The company’s status as a qualifying company does not end if, within the relevant period in section HA 34(1) or HA 35(2) and (3), an election relating to the whole of the relevant share- holding is made.
Deﬁned in this Act: company, qualifying company, shareholder Compare: 2004 No 35 s HG 6(2)(c) HA 37 Period of grace for new shareholder (1) When this section applies This section applies when a company has been a qualifying company but fails to meet the requirement of section HA 5 when— (a) a person other than an existing shareholder acquires shares in the company; or an existing shareholder acquires legal capacity.
(b) 1467 Part H s HA 38 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Period for making election The company’s status as a qualifying company does not end if, within 63 days of the date on which either the shares were acquired or the shareholder acquired legal capacity, an election relating to the whole of the relevant shareholding is made.
Extension of time The Commissioner may extend the 63-day period in subsec- tion (2) on the application of the company, the new share- holder, the existing shareholder, or a person who is entitled to make an election as shareholder under section HA 5.
Deﬁned in this Act: Commissioner, company, qualifying company, share, shareholder Compare: 2004 No 35 s HG 6(3) Elections: loss-attributing qualifying companies HA 38 Elections by directors and shareholders required Election and notiﬁcation For a company to become an LAQC, every person who is a director of the company, and every shareholder in the company with legal capacity, must advise the Commissioner in a notice of election.
Minority shareholders Despite subsection (1) and assuming the other requirements of sections HA 5 to HA 9 have been met, if a shareholder whose effective interest in a company is less than 50% has not signed the notice, the election nevertheless has effect if 1 or more shareholders in the company whose interests amount to more than 50% have signed the notice.
Notifying Commissioner The notice must be provided before the start of the relevant in- come year or, if the company has not previously been required to provide a return of income, within the time allowed by sec- tion 37 of the Tax Administration Act 1994 for providing a return for the company’s ﬁrst income year.

Directors and shareholders at time A person is considered a director of a company under subsec- tion (1) if they hold the ofﬁce at the time the notice is provided.
Similarly, a person is considered a shareholder if they have an (1) (2) (3) (4) 1468 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 41 effective interest in the company at the time the notice is pro- vided.
Deﬁned in this Act: Commissioner, company, director, effective interest, in- come year, LAQC, notice, notify, return of income, shareholder Compare: 2004 No 35 ss HG 14(c), HG 14A HA 39 Revocation of elections Sections HA 28 to HA 37 apply to an election made under section HA 38 as if it were an election by a director or a share- holder under section HA 5.
Deﬁned in this Act: director, shareholder Compare: 2004 No 35 s HG 15 Qualifying company election tax HA 40 Liability for qualifying company election tax (1) (2) Payment of tax A company that becomes a qualifying company must pay a qualifying company election tax in relation to the change in status, of an amount calculated under section HA 41.

The date for payment is set out in section HA 42.


Payment on amalgamation If a company that is not a qualifying company amalgamates with a qualifying company and ends its existence on the amal- gamation, the amalgamated company must pay a qualifying company election tax under subsection (1).
Deﬁned in this Act: amalgamated company, amalgamation, amount, company, pay, qualifying company, qualifying company election tax Compare: 2004 No 35 s HG 11(1), (1A) HA 41 Calculating qualifying company election tax (1) Formula The amount of qualifying company election tax that a com- pany must pay under section HA 40 is calculated using the formula— 1469 Part H s HA 41 Income Tax Act 2007 Reprinted as at 1 January 2010 Deﬁnition of items in formula The items in the formula are deﬁned in subsections (3) to (6).
Dividends Dividends is the sum of the amounts that would be dividends if the company— (a) disposed of all its property, other than cash, to an unre- lated 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 meet- ing the liabilities; and was liquidated, with the amount of cash remaining be- ing distributed to its shareholders without imputation credits or FDP credits attached.
(c) Balances Balances is the sum of the following amounts: (a) (b) (c) the balance in the company’s imputation credit account: the balance in the company’s FDP account: an amount of income tax payable for an earlier income year but not paid before the relevant date, less refunds due for the earlier income year but paid after the relevant date.
[Repealed] (d) Assessable income Assessable income is the total assessable income that the company would derive by taking the actions described in sub- section (3)(a) and (b) less the amount of any deduction that the company would have for taking those actions.

Tax rate Tax rate is the basic rate of income tax set out in schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) for the relevant income year of the company.
Relevant date In subsections (3) to (5), the relevant date for measuring items in the formula is the date just before the company became a qualifying company or, as applicable, at the time the company ended its existence.
(2) (3) (4) (5) (6) (7) 1470 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 42 (8) Income tax and refund For the purposes of subsection (4)(c),— (a) (b) (c) 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 (which re- late to imputation credits): a refund of income tax due is the amount that would, when paid, give rise to a debit to the company’s im- putation credit account under section OB 30 to OB 59 (which relate to imputation debits): if the company pays income tax with a purpose or inten- tion of reducing the amount of election tax, the amount of credit in the imputation credit account is reduced by the amount of the credit arising from the company’s ac- tion, unless that purpose is merely incidental.
Deﬁned in this Act: amount, assessable income, company, deduction, dividend, FDP account, FDP credit, imputation credit, imputation credit account, income tax, income year, liquidation, pay, qualifying company, qualifying company election tax, shareholder Compare: 2004 No 35 s HG 11(1B), (2), (4) Section HA 41(4)(c): amended (with effect on 30 June 2009), on 6 October 2009, by section 259(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HA 41(4)(d): repealed (with effect on 30 June 2009), on 6 October 2009, by section 259(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HA 41(6): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HA 41(8)(c): substituted (with effect on 30 June 2009), on 6 October 2009, by section 259(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HA 41 list of deﬁned terms FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 259(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HA 42 Paying qualifying company election tax A company must pay a qualifying company election tax under section HA 40 to the Commissioner no later than the com- pany’s terminal tax date for the tax year corresponding to the 1471 Part H s HA 43 Income Tax Act 2007 Reprinted as at 1 January 2010 income year in which the company chooses to become a quali- fying company.
Deﬁned in this Act: Commissioner, company, income year, pay, qualifying company, qualifying company election tax, terminal tax date Compare: 2004 No 35 s HG 12 Effective interests in qualifying companies HA 43 Meaning of effective interest (1) (2) What this section does This section deﬁnes an effective interest in a company, which is the measure of a person’s liability under section HA 8.
(b) Effective interest Effective interest for a person and a company, at a particular time or for an income year, means— (a) the person’s voting interest in the company at the time or for the income year, unless paragraph (b) applies: if there is a market value circumstance for the company at the time or at some time during the income year, the average of— (i) the person’s voting interest in the company at the time or for the income year; and the person’s market value interest in the company at the time or for the income year.
Deﬁned in this Act: company, effective interest, income year, market value circumstance, market value interest, voting interest Compare: 2004 No 35 s OB 1 effective interest (ii) HA 44 Measuring effective interests Subpart YC A person’s voting interest and market value interest in a com- pany is measured under subpart YC (Measurement of com- pany control and ownership).
If the person is a company, the voting interest and market value interest are measured at a par- ticular time or for an income year under those sections as if— (a) (b) the person were not a company; and sections YC 4 and YC 6 (which relate to corporate shareholders and certain excluded securities) did not apply.
(1) 1472 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HA 44 (2) (3) (4) (5) (6) If interests vary during income year If a person’s voting interest or market value interest varies dur- ing an income year, the measure of their effective interest is the weighted average of their voting interest or market value in- terest, as applicable, for the income year.
If election made during income year If a shareholder makes an election under section HA 5 after the start of the income year, their voting interest and market value interest is measured from the earliest day in the income year when they became a shareholder in the company, even if the day is earlier than the date of the election.
Shareholders’ interests after revocation A person who revokes an election under section HA 32 or HA 33 is treated as having no voting interest and no market value interest for the period of the income year after the revocation takes effect unless they make a later election for the same in- come year.

In this subsection, the person is a trustee when an election is made under section HA 28 by a person other than the trustee.
When majority shareholders’ liabilities excluded If a majority shareholder has made an election and agreed under sections HA 8 and HA 29 to take personal liability to the extent of a minority shareholder’s effective interest in the company, any effective interest for which the minority share- holder has agreed to be personally liable under section HA 8 is excluded in measuring the majority shareholder’s effective interest.
Minority shareholder’s liability after revocation If a majority shareholder’s election is revoked under section HA 32(1) or HA 33(1)(d), the effective interest of the minor- ity shareholder for which the majority shareholder is liable is treated as zero for the part of the income year that follows the day on which the revocation takes effect.
Deﬁned in this Act: company, effective interest, income year, market value interest, shareholder, trustee, voting interest Compare: 2004 No 35 s HG 2 1473 Part H s HC 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Subpart HC—Trusts Introductory provisions HC 1 What this subpart does What this subpart does This subpart, together with the trust rules,— (a) beneﬁciary income: a taxable distribution: provides for the taxation of distributions from trusts, for this purpose deﬁning— (i) (ii) provides for the taxation of trustee income: classiﬁes trusts into the following 3 categories for the purposes of determining the treatment of distributions that are not beneﬁciary income: complying trusts: (i) foreign trusts: (ii) (iii) non-complying trusts: determines who is a settlor, and sets out their income tax liability: sets out the treatment of trusts settled by persons be- coming resident in New Zealand.
(b) (c) (d) (e) Excluded: certain funds and distributions The trust rules do not apply to— (a) (b) a unit trust: a group investment fund to the extent to which it is treated as a company under this Act: a Maori authority: a distribution under section HZ 1 (Distributions from trusts of pre-1989 tax reserves).

(c) (d) Disclosure requirements: non-resident trustees Section 59 of the Tax Administration Act 1994 requires the disclosure of a settlement on a trust with a non-resident trustee.
Avoidance arrangements Section GB 22 (Arrangements involving trust beneﬁciary in- come) may apply to treat a beneﬁciary as receiving property, or enjoying services or beneﬁts, in fact received, or enjoyed, by another person.
(1) (2) (3) (4) 1474 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 2 (5) Superannuation funds entering trust rules A superannuation scheme that is treated as a company because it is a unit trust and then becomes a superannuation fund is treated as— (a) liquidated under section CD 12 (Superannuation schemes entering trust rules) immediately before the date on which it becomes a superannuation fund; and no longer a company.
(b) Deﬁned in this Act: arrangement, beneﬁciary income, company, complying trust, distribution, foreign trust, group investment fund, income tax liability, li- quidation, Maori authority, non-complying trust, non-resident, resident in New Zealand, settlement, settlor, superannuation fund, superannuation scheme, tax- able distribution, trust rules, trustee, trustee income, unit trust Compare: 2004 No 35 ss GC 14, HH 1(8), (9), HH 3(6), HH 4(8), Income Tax Amendment Act 1988 (No 5) s 9 HC 2 Obligations of joint trustees for calculating income and providing returns (1) (2) What this section applies to This section applies for the purposes of the obligations im- posed by section BB 2 (Main obligations) on 2 or more per- sons who derive income jointly as trustees of a trust.
Single person The trustees of the trust are treated in that capacity as if they were a notional single person, and are jointly and severally liable to satisfy the income tax liability of the notional single person.

They must— (a) (b) calculate the trust’s taxable income for a tax year; and for that tax year, provide a joint return of income for the trust under section 42(1)(a) of the Tax Administration Act 1994.
Deﬁned in this Act: income, income tax liability, return of income, tax year, taxable income, trustee Compare: 2004 No 35 s HD 1(1)(a) 1475 Part H s HC 3 Income Tax Act 2007 Reprinted as at 1 January 2010 HC 3 Multiple settlements For the purposes of this subpart, if a settlement is made on a trust and further settlements are made on the same terms, a trustee of the trust may treat all the settlements as 1 trust.
Deﬁned in this Act: settlement, trustee Compare: 2004 No 35 s HH 1A HC 4 Corpus of trust Meaning In the trust rules, corpus means an amount that is equal to the market value of a settlement of property on the trust measured at the date of the settlement.

Subsection (2) overrides this subsection.

Settlements excluded from corpus Corpus does not include an amount equal to the market value of the property settlements described in subsections (3) to (5).
Settlements on other trusts A property settlement by a trustee of another trust is excluded from corpus to the extent to which, if the property were dis- tributed to a beneﬁciary of the other trust, and the beneﬁciary was resident in New Zealand, the distribution would be bene- ﬁciary income or a taxable distribution to that beneﬁciary.

Deductions A property settlement for which the settlor is allowed a deduc- tion is excluded from corpus.
Income or dividend A property settlement is excluded from corpus if, but for the fact of the settlement,— (a) (b) (c) it would be income of the settlor; or [Repealed] it would fall under paragraph (a) if the settlor were resi- dent in New Zealand at the time of the settlement.
Deﬁned in this Act: amount, beneﬁciary income, corpus, deduction, distribu- tion, dividend, income, resident in New Zealand, settlement, settlor, taxable distribution, trust rules, trustee Compare: 2004 No 35 s OB 1 corpus Section HC 4(5)(b): repealed (with effect on 30 June 2009), on 6 October 2009, by section 260(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(1) (2) (3) (4) (5) 1476 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 6 Section HC 4(5)(c): substituted (with effect on 30 June 2009), on 6 October 2009, by section 260(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HC 4 list of deﬁned terms FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 260(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HC 5 Amounts derived by trustees Trust income (1) (2) Either beneﬁciary or trustee income An amount of income derived in an income year by a trustee of a trust is either— (a) (b) beneﬁciary income under section HC 6; or trustee income under section HC 7.
Statutory amounts treated as derived For the purposes of subsection (1) and sections HC 6 and HC 7, if the trustee is treated as having an amount of income in the income year under a provision in this Act and the amount is not derived under ordinary concepts, then the amount is treated as derived in the income year.
Deﬁned in this Act: amount, beneﬁciary income, income, income year, trustee, trustee income Compare: 2004 No 35 s OB 1 beneﬁciary income, trustee income HC 6 Beneﬁciary income (1) Meaning An amount of income derived in an income year by a trustee of a trust is beneﬁciary income to the extent to which— (a) it vests absolutely in interest in a beneﬁciary of the trust in the income year; or it is paid to a beneﬁciary of the trust in the income year or by the date after the end of the income year referred to in subsection (1B).
(b) Date by which income must be allocated (1B) The date referred to in subsection (1)(b) is the later of the fol- lowing: (a) (b) a date that falls within 6 months of the end of the income year; or the earlier of— 1477 Part H s HC 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (i) (ii) the date on which the trustee ﬁles the return of income for the income year; or the date by which the trustee must ﬁle a return for the income year under section 37 of the Tax Administration Act 1994.
(2) Exclusions Beneﬁciary income does not include— (a) an amount of income derived by a trustee of a trust in an income year in which the trust is a superannuation fund; or an amount of income derived by a trustee that is income to which sections CC 3(2) (Financial arrangements) and EW 50 (Income when debt forgiven to trustee) apply.
(b) Deriving beneﬁciary income in same year (3) When an amount derived by a trustee in an income year is also beneﬁciary income, the beneﬁciary is treated as having derived the income in the same tax year as that corresponding to the trustee’s income year.
Deriving beneﬁciary income in same year as trustee [Repealed] [Repealed] Deﬁned in this Act: amount, beneﬁciary income, income, income year, pay, return of income, superannuation fund, tax year, trustee Compare: 2004 No 35 ss OB 1 beneﬁciary income, OF 2 (3) Section HC 6(1)(b): substituted (with effect on 1 April 2009), on 7 December 2009, by section 43(1) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section HC 6(1B) heading: inserted (with effect on 1 April 2009), on 7 Decem- ber 2009, by section 43(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 6(1B): inserted (with effect on 1 April 2009), on 7 December 2009, by section 43(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section HC 6(3) heading: substituted (with effect on 1 April 2009), on 7 De- cember 2009, by section 43(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 6(3): substituted (with effect on 1 April 2009), on 7 December 2009, by section 43(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section HC 6(4) heading: repealed (with effect on 1 April 2009), on 7 Decem- ber 2009, by section 43(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

(4) 1478 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 8 Section HC 6(4): repealed (with effect on 1 April 2009), on 7 December 2009, by section 43(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section HC 6 list of deﬁned terms non-standard income year: repealed (with effect on 1 April 2009), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 6 list of deﬁned terms return of income: inserted (with effect on 1 April 2009), on 7 December 2009, by section 126 of the Taxation (Consequen- tial Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
HC 7 Trustee income (1) (2) (3) Meaning To the extent to which it is not beneﬁciary income, an amount of income derived by a trustee of a trust is trustee income.

Minors’ beneﬁciary income An amount of beneﬁciary income to which section HC 35 ap- plies that is derived in an income year by a person who is a minor is treated as if it were trustee income for the purposes of— (a) (b) (c) determining the tax rate that applies; and paying the tax; and providing returns of income.
Exclusions from corpus The amount that is the market value of a property settlement referred to in section HC 4(3) to (5) is treated as trustee income of the trustee of the recipient trust derived in the income year of settlement.
Deﬁned in this Act: amount, beneﬁciary income, corpus, income, income year, minor, pay, return of income, settlement, trustee, trustee income Compare: 2004 No 35 ss HH 1(7), HH 3A(1)(a), OB 1 trustee income Section HC 7(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 261(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HC 8 Amounts received after person’s death (1) When this section applies This section applies when a trustee of an estate of a deceased person receives an amount in an income year that is not income that the person derived during their lifetime, but would have 1479 Part H s HC 9 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) been included in the person’s income had they been alive when it was received.
Income The amount is treated under section CV 12 (Trustees: amounts received after person’s death) as income derived by the trustee in the income year.
Deﬁned in this Act: amount, income, income year, trustee Compare: 2004 No 35 s HH 8 Classiﬁcation of trusts HC 9 Classifying trusts A trust is classiﬁed at the time it makes a distribution as— (a) (b) (c) Deﬁned in this Act: complying trust, distribution, foreign trust, non-complying trust a complying trust under section HC 10: a foreign trust under section HC 11: a non-complying trust under section HC 12.
HC 10 Complying trusts Requirements for complying trusts A trust is a complying trust in relation to a distribution if— the following requirements are met for the life of the (a) trust up to the time of distribution: (i) no trustee income derived includes an amount of non-resident passive income, or non-residents’ income foreign-sourced income, or exempt under section CW 54 (Foreign-sourced amounts derived by trustees); and the tax obligations relating to the trustee’s in- come tax liability have been satisﬁed for every tax year; or (ii) (b) it is a superannuation fund.
Foreign trust choosing to become complying trust A foreign trust may become a complying trust to the extent set out in section HC 30 by— (a) an election being made under section HC 30(2)— before the time of distribution; and (i) (1) (2) 1480 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 11 (3) (4) (ii) within 12 months of the date on which the settlor referred to in section HC 30(1) becomes resident in New Zealand; and the requirements of subsection (1)(a) are met for trustee income derived after the election date.
(b) Life of trust The life of the trust referred to in subsection (1)(a) includes every income year from the start of the income year in which a settlement was ﬁrst made on the trust up to the time of the distribution.

Complying trusts: meeting requirements For the purposes of subsection (1)(a),— (a) section HC 29(6) does not apply in determining (b) whether the requirements are met: the requirements may be met by a person who has made an election under section HC 33.
Deﬁned in this Act: amount, complying trust, distribution, exempt income, for- eign-sourced amount, foreign trust, income tax liability, income year, non-resi- dent passive income, non-residents’ foreign-sourced income, resident in New Zealand, settlement, settlor, superannuation fund, tax year, trustee, trustee in- come Compare: 2004 No 35 ss HH 2(2), HH 4(5) proviso, OB 1 foreign trust, quali- fying trust HC 11 Foreign trusts A trust is a foreign trust in relation to a distribution if no settlor is resident in New Zealand at any time in the period that— (a) starts on the later of 17 December 1987 and the date on which a settlement was ﬁrst made on the trust; and ends on the date of distribution.
(b) Deﬁned in this Act: distribution, foreign trust, resident in New Zealand, settle- ment, settlor Compare: 2004 No 35 s OB 1 foreign trust 1481 Part H s HC 12 Income Tax Act 2007 Reprinted as at 1 January 2010 HC 12 Non-complying trusts A trust is a non-complying trust in relation to a distribution if it is neither a complying trust nor a foreign trust.
Deﬁned in this Act: complying trust, distribution, foreign trust, non-complying trust Compare: 2004 No 35 s OB 1 non-qualifying trust HC 13 Charitable trusts In the trust rules, a trust is a charitable trust in an income year if— (a) all income derived or accumulated by the trustee in that or in any earlier income year is held for charitable pur- poses; and any income derived by the trustee in the income year is exempt income under either section CW 41(1) (Char- ities: non-business income) or CW 42(1) (Charities: business income).
(b) Deﬁned in this Act: charitable purpose, charitable trust, exempt income, in- come, income year, trust rules, trustee Compare: 2004 No 35 s HH 1(5), (6) Distributions from trusts HC 14 Distributions from trusts Transfers of value A trustee makes a distribution when the trustee transfers value to a person because the person is a beneﬁciary of the trust.
Transfers to other trusts included Despite subsection (1), a settlement for the beneﬁt of a bene- ﬁciary is treated as a transfer of value only— (a) if the amount or the property being settled would have been beneﬁciary income of, or a taxable distribution to, a beneﬁciary, had it been distributed at the time to a beneﬁciary resident in New Zealand; or when sections EW 50 or EZ 39 (which relate to forgive- ness of debt) applies, if the property being settled is an amount forgiven and treated as paid as described in sec- tion EW 44(1) or (2) (Consideration when debt forgiven for natural love and affection) or EZ 39(1).
(b) (1) (2) 1482 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 15 (3) (4) (5) When distribution made A distribution is made when what is transferred— vests absolutely in interest in the person; or (a) is paid to the person.

(b) Manner of distribution A distribution may be made directly or indirectly, or by 1 trans- action or a number of transactions, whether related, connected, or otherwise.
Nil value of beneﬁciary relationship The fact that a person is, or will become, a beneﬁciary of a trust does not constitute the giving or receiving of value.
Deﬁned in this Act: amount, beneﬁciary income, distribution, pay, resident in New Zealand, settlement, taxable distribution, transfer of value, trustee Compare: 2004 No 35 s OB 1 distribution HC 15 Taxable distributions from non-complying and foreign trusts (1) (2) (3) (4) When subsection (2) applies Subsection (2) applies for a trust that is a non-complying trust at the time a distribution to a beneﬁciary is made.
Taxable distributions: non-complying trusts The distribution is a taxable distribution to the extent to which it is not a distribution of— beneﬁciary income; or (a) a part of the corpus of the trust; or (b) a payment or a transaction that represents a distribution (c) of the corpus of the trust.

When subsection (4) applies Subsection (4) applies for a trust that is a foreign trust at the time a distribution to a beneﬁciary is made.
Taxable distributions: foreign trusts The distribution is a taxable distribution to the extent to which it is not a distribution of— beneﬁciary income; or (a) a part of the corpus of the trust; or (b) a proﬁt from the realisation of a capital asset or another (c) capital gain; or 1483 Part H s HC 15 Income Tax Act 2007 Reprinted as at 1 January 2010 (d) a payment or a transaction that represents a distribution of either the corpus of the trust referred to in paragraph (b) or a capital gain referred to in paragraph (c).
Determining amount of gain For the purposes of subsection (4)(c),— the proﬁt does not include— (a) (i) (ii) a gain that must be taken into account for the purposes of determining an income tax liability; or a capital gain derived by the trustee through a transaction or series of transactions between the trustee and a person associated with them under the parts of subpart YB (Associated persons and nominees) that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or the 1988 version provisions: (b) the amount of the proﬁt is determined after subtracting any capital loss that the trustee incurs in the income year in which the amount was derived.
Amounts not subject to ordering rule To the extent to which a distribution is made from a trust that is not a complying trust by disposing of property at less than market value or providing services to a beneﬁciary at less than market value, the distribution is a taxable distribution and is not subject to the ordering rule in section HC 16.
Inadequate records If the records of a trust that is not a complying trust do not al- low an accurate determination of the elements of a distribution under section HC 16, the distribution is a taxable distribution.
Deﬁned in this Act: 1973 version provisions, 1988 version provisions, 1990 version provisions, amount, associated person, beneﬁciary income, complying trust, corpus, distribution, foreign trust, income tax liability, income year, non- complying trust, pay, superannuation fund, taxable distribution, trustee Compare: 2004 No 35 ss HH 6(2)(c), (3), OB 1 taxable distribution Section HC 15(5)(a)(ii): substituted (with effect on 1 April 2008), on 6 October 2009, by section 262(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(5) (6) (7) 1484 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 16 HC 16 Ordering rule for distributions from non-complying and foreign trusts (1) (2) (3) (4) (b) (c) (d) (e) (b) When this section applies This section applies for the purposes of the trust rules when a trustee of a non-complying trust or a foreign trust makes a distribution in an income year to a beneﬁciary.

Subsections (6) and (7) override this subsection.
Order of elements of distribution The distribution is treated as consisting of the following elem- ents in the following order: (a) ﬁrst, an amount of income that the trustee derives in the income year: second, an amount of income, other than beneﬁciary income, that the trustee has derived in an earlier income year: third, an amount that the trustee derives in the income year from the realisation of a capital asset of the trust or another capital gain: fourth, an amount that the trustee has derived in an ear- lier income year from the realisation of a capital asset of the trust or another capital gain: last, the corpus of the trust.
Order and elements In subsection (2),— (a) an amount must not be treated as included in the distri- bution if the amount has been treated under this section as being included in an earlier or contemporaneous dis- tribution from the trust: the paragraphs are applied in order, and the next para- graph applies only to the extent to which the amount of the distribution is more than the cumulative amounts de- scribed in that paragraph and the preceding paragraphs.
Deductions and capital losses subtracted For the purposes of subsection (2),— (a) in paragraphs (a) and (b), the amount of income is deter- mined after subtracting the amount of a deduction that is taken into account in the income year in the calcula- 1485 Part H s HC 16 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) tion of net or taxable income for the corresponding tax year: in paragraphs (c) and (d), the amount is determined after subtracting the amount of a capital loss that the trustee incurs in the income year.
Transactions that are not genuine In the determination of the elements of a distribution to a bene- ﬁciary (beneﬁciary A), no amount of income or capital gain derived by the trustee of the trust is treated as distributed to another beneﬁciary of the trust (beneﬁciary B) if the effect is that some or all of the distribution to beneﬁciary A would be treated as not being a taxable distribution, unless the distribu- tion to beneﬁciary B meets all the following requirements: (a) it is a genuine transaction entered into and carried out in good faith; and it places the amount beyond the possession and control of the trustee in their capacity as trustee; and it does not itself constitute a settlement.
(b) (c) Exclusions: terms of trust This section does not apply to the following distributions which are instead treated as consisting of the amount that reﬂects the terms of the trust or the terms of the exercise of the trustee’s discretion: (a) a distribution by the trustee of a complying trust which is treated as exempt income under section CW 53 (Dis- tributions from complying trusts), unless an election to pay income tax on trustee income has been made for the purposes of section HZ 2 (Trusts that may become com- plying trusts); or a distribution from a non-discretionary trust— (i) created by will or codicil, or by an order of court varying or modifying the provisions of a will or codicil; or created on an intestacy or partial intestacy; or on which no settlement has been made after 17 December 1987; or (ii) (iii) (b) (c) a distribution from a trust other than a non-complying trust that is settled by a natural person who makes an election under section HC 30(2).
(5) (6) 1486 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 17 (7) (8) Exclusions: taxable distributions This section does not apply to a distribution described in sec- tion HC 15(6).

Meaning of non-discretionary trust In this section, a non-discretionary trust is a trust in relation to which the trustee has no discretion as to the source, nature, and amount of distributions to beneﬁciaries, including but not limited to the classiﬁcation of trust property as capital or in- come.
Deﬁned in this Act: amount, beneﬁciary income, complying trust, corpus, de- duction, distribution, exempt income, foreign trust, income, income tax, in- come year, net income, New Zealand resident, non-complying trust, non-dis- cretionary trust, settlement, tax year, taxable distribution, taxable income, trust rules, trustee, trustee income Compare: 2004 No 35 s HH 6(1), (2), (4) Tax treatment of amounts that beneﬁciaries derive from trusts HC 17 Amounts derived as beneﬁciary income (1) (2) Non-minor beneﬁciaries An amount that a person derives in an income year as beneﬁ- ciary income is income of the person under section CV 13(a) (Amounts derived from trusts), except to the extent to which it is beneﬁciary income to which section HC 35 applies.
Minor beneﬁciaries Subsection (1) does not apply to beneﬁciary income derived by a minor.

The beneﬁciary income is excluded income of the minor, and treated as trustee income under sections CX 58 (Amounts derived by minors from trusts) and HC 35.
Deﬁned in this Act: amount, beneﬁciary income, excluded income, income year, minor, trustee income Compare: 2004 No 35 ss HH 3(1), HH 3A(1)(b) 1487 Part H s HC 18 Income Tax Act 2007 Reprinted as at 1 January 2010 HC 18 Taxable distributions from foreign trusts An amount that a person derives in an income year as a taxable distribution from a foreign trust is income of the person under section CV 13(b) (Amounts derived from trusts).
Deﬁned in this Act: amount, foreign trust, income, income year, taxable distri- bution Compare: 2004 No 35 s HH 3(1) HC 19 Taxable distributions from non-complying trusts (1) (2) Excluded income An amount that a person derives in an income year as a taxable distribution from a non-complying trust is excluded income of the person under section CX 59 (Taxable distributions from non-complying trusts).
Relationship with other provisions Despite subsection (1), section BF 1(b) (Other obligations) ap- plies to impose income tax on the amount of the taxable dis- tribution.

Section HC 22 may apply to reduce the amount of the taxable distribution, and section HC 34 sets the rate of tax for the purposes of section BF 1(b).
Deﬁned in this Act: amount, excluded income, income tax, income year, non- complying trust, taxable distribution Compare: 2004 No 35 s HH 3(1), (4) HC 20 Distributions from complying trusts An amount that a person derives in an income year is exempt income of the person under section CW 53 (Distributions from complying trusts) if— (a) the amount is a distribution from a complying trust other than a community trust; and the amount is not beneﬁciary income.
(b) Deﬁned in this Act: amount, beneﬁciary income, community trust, complying trust, distribution, exempt income, income year Compare: 2004 No 35 s HH 3(5) HC 21 Distributions from community trusts What this section applies to This section applies when a community trust distributes an amount other than beneﬁciary income to a person.
(1) 1488 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 22 (2) (3) Exclusion Subsection (1) does not apply to the extent to which the amount represents— (a) income derived by the trustee in or before the 2003–04 income year: corpus of the trust: a capital gain of the trust: a distribution, settlement, or dividend made or paid to the trust in the 2004–05 or 2005–06 income year on the winding up of a trust or company, if— (i) (b) (c) (d) the community trust provided the corpus of the trust and the trust would have been run for charit- able purposes but for the distribution, settlement, or dividend: the company is wholly-owned by the community trust and would have been established and run exclusively for charitable purposes but for the distribution, settlement, or dividend.
(ii) Income Despite sections HC 15 and HC 20, the amount is income of the person under section CV 14 (Distributions from commu- nity trusts).
Deﬁned in this Act: amount, beneﬁciary income, charitable purpose, commu- nity trust, company, corpus, distribution, dividend, income, income year, pay, settlement, trustee, trustee income Compare: 2004 No 35 s HH 3(5A) Section HC 21(3): amended (with effect on 1 April 2008), on 6 October 2009, by section 263(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HC 22 Use of tax losses to reduce taxable distributions from non-complying trusts (1) When this section applies This section applies in an income year when a person— (a) has, for the corresponding tax year, a tax loss compo- nent or loss balance to which sections IA 2 to IA 10 (which relate to the use of tax losses) apply; and derives a taxable distribution from a non-complying trust to which section HC 19 applies.
(b) 1489 Part H s HC 23 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) Reducing taxable distribution The person may reduce the amount of the taxable distribution by an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) tax loss is the amount of a tax loss component or loss balance that the person chooses to use: tax rate is the basic rate of income tax set out in sched- income tax, ule 1, part A, clause 3 (Basic tax rates: ESCT, RSCT, RWT, and attributed fringe beneﬁts): distribution rate is the basic rate of income tax set out in schedule 1, part A, clause 4.
(b) (c) Loss no longer available If a person takes an amount of a tax loss or a loss balance into account under this section, the amount cannot be subtracted from their net income for the corresponding tax year for the purposes of section IA 2(2) (Tax losses).
Deﬁned in this Act: amount, income tax, income year, loss balance, net income, non-complying trust, tax loss, tax loss component, tax year, taxable distribution Compare: 2004 No 35 s HH 3(4) Section HC 22(3)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HC 23 Temporary absences of beneﬁciaries When this section applies This section applies when— (a) (b) a person who is a beneﬁciary of a trust and who is resi- dent in New Zealand stops being resident; and within a period of 5 years from the date of the end of their residence, they become resident in New Zealand again.
Income derived during the period The person is treated as deriving income under section CV 15 (Amounts derived from trusts while person absent from New Zealand) to the extent to which they would have been treated as deriving an amount of beneﬁciary income or a taxable dis- (1) (2) 1490 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 24 (3) tribution from a foreign trust or a non-complying trust if they had remained in New Zealand for the period of their absence.
Allocation The amount is treated as derived on the day on which the per- son becomes resident in New Zealand again.
Deﬁned in this Act: amount, beneﬁciary income, foreign trust, income, non- complying trust, resident in New Zealand, taxable distribution Compare: 2004 No 35 s HH 3(3) Tax treatment of trustee income HC 24 Trustees’ obligations (1) (2) (3) (4) (5) Liability as individual for trustee income A trustee must satisfy the income tax liability for their taxable income as if they were an individual beneﬁcially entitled to the trustee income.
No tax credits, cash basis treatment In determining the income tax liability, the trustee is not en- titled to— (a) have a tax credit under Part L or M (which relate to tax credits); or be a cash basis person, unless section EW 60 (Trustee of deceased’s estate) applies.

(b) Beneﬁciary income of minors Section HC 35 applies to treat beneﬁciary income derived by a minor as if it were trustee income.
Calculating trustees’ deductions Section DV 9(2) (Trusts) applies for the purposes of calculat- ing a trustee’s deductions.

Superannuation funds Sections CX 40, and DV 1 to DV 4 (which relate to super- annuation funds) override this section.
Deﬁned in this Act: beneﬁciary income, cash basis person, deduction, income tax liability, minor, tax credit, taxable income, trustee, trustee income Compare: 2004 No 35 ss DV 9(2), HH 4(1), (2) 1491 Part H s HC 25 Income Tax Act 2007 Reprinted as at 1 January 2010 HC 25 Foreign-sourced amounts: non-resident trustees When this section applies This section applies when a non-resident trustee derives in an income year a foreign-sourced amount that would be assess- able income if derived by a person resident in New Zealand.
Trustee income Despite section BD 1(4)(a), (b), and (5)(c) (Income, exempt income, excluded income, non-residents’ foreign-sourced in- come, and assessable income), the amount is assessable in- come of the trustee if, at any time in the income year,— (a) a settlor of the trust is a New Zealand resident who is not a transitional resident; or the trust is a superannuation fund; or the trust is a testamentary trust or an inter vivos trust, of which— (i) (ii) a trustee is resident in New Zealand; and a settlor died resident in New Zealand (whether or not they died in the income year).
(b) (c) First exception Subsection (2) does not apply if— (a) the trustee is resident outside New Zealand at all times in the income year; and no settlement has been made on the trust after 17 De- cember 1987 and, if an election has been made under section HZ 2 (Trusts that may become complying trusts), the election has not been made by the trustee.
Second exception Subsection (2) does not apply if— (a) the trustee is resident outside New Zealand at all times in the income year; and when a settlement has been made on the trust after 17 December 1987, it was made only by a settlor who is not resident in New Zealand— (i) (ii) at the date of the settlement; and at any time between 17 December 1987 and the date of settlement.
(b) (b) Extent to which subsections (3) and (4) apply Subsections (3) and (4) do not— (1) (2) (3) (4) (5) 1492 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 26 (a) (b) affect a settlor’s income tax liability under the trust rules: apply to determine whether the tax obligations in rela- tion to the trustee’s income tax liability are met for the purposes of section HC 10(1)(a)(ii) and meeting the re- quirements for a complying trust.
(6) Treatment of non-resident trustee in other provisions For the purpose only of calculating the taxable income of a trustee referred to in subsection (2), and not otherwise, the trustee is treated as resident in New Zealand for the purposes of— (a) sections EW 9 and EW 11 (which relate to ﬁnancial arrangements): section LJ 2 (Tax credits for foreign income tax): section OE 1 (General rules for companies and other persons with branch equivalent tax accounts): the international tax rules.
amount, assessable income, complying trust, (d) Deﬁned in this Act: for- eign-sourced amount, income, income tax liability, income year, international tax rules, New Zealand, New Zealand resident, non-resident, resident in New Zealand, settlement, settlor, superannuation fund, taxable income, transitional resident, trust rules, trustee Compare: 2004 No 35 s HH 4(3), (3A), (6) provisos (b) (c) HC 26 Foreign-sourced amounts: resident trustees (1) Exempt income A foreign-sourced amount that a New Zealand resident trustee derives in an income year is exempt income under section CW 54 (Foreign-sourced amounts derived by trustees) if— (a) no settlor of the trust is at any time in the income year a New Zealand resident who is not a transitional resident; and the trust is not— (i) (ii) a superannuation fund; or a testamentary trust or an inter vivos trust of which a settlor died resident in New Zealand (whether or not they died in the income year).
(b) 1493 Part H s HC 27 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) When subsection (3) applies Subsection (3) applies for an income year to a resident foreign trustee of a foreign trust to which sections 22(2)(fb) and (m), and 59B of the Tax Administration Act 1994 applies.
When knowledge offence committed Subsection (1) does not apply if the trustee— (a) is not a qualifying resident foreign trustee for the in- come year; and is convicted of an offence under section 143A of the Tax Administration Act 1994; and has committed the offence in connection with informa- tion relating to the income year.

(b) (c) Exception Subsection (3) does not apply to an offence under section 143A(1)(b) if the information is supplied to the Commissioner after the conviction is entered.
Deﬁned in this Act: Commissioner, exempt income, foreign-sourced amount, foreign trust, income year, New Zealand resident, qualifying resident foreign trustee, resident foreign trustee, settlor, superannuation fund, transitional resi- dent, trustee Compare: 2004 No 35 s HH 4(3B), (3BB), (3BC) Settlors and their liabilities HC 27 Who is a settlor?
When this section applies This section applies for the purposes of— (a) (b) (c) the trust rules; and the consolidation rules; and section CW 59 (New Zealand companies operating in Niue); and section YA 1 (Deﬁnitions), the deﬁnition of settlement; and subpart YB (Associated persons and nominees).
(d) (e) Meaning of settlor A settlor of a trust is a person who, at any time,— (a) transfers value— (i) (ii) to the trust; or for the beneﬁt of the trust; or (1) (2) 1494 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 27 on terms of the trust: (iii) provides ﬁnancial assistance to the trust or for the bene- ﬁt of the trust with an obligation to pay on demand, and the right to demand is not exercised or is deferred: is treated as a settlor under section HC 28.
(b) (c) (3) Trusts for retirement beneﬁts for employees Despite subsection (2), a person resident in New Zealand who makes a settlement on a trust as an employer for the beneﬁt of 1 or more employees is not a settlor of the trust if the following circumstances apply: (a) the trust is established or created mainly to provide re- tirement beneﬁts to natural persons; and the trust is neither a foreign superannuation scheme nor a superannuation fund.
(b) Employee share purchase agreements (3B) Despite subsection (2), an employer is not a settlor for the purposes of the trust rules in relation to a payment made by them to the trustee of an employee share purchase agreement if— (a) some or all of the payment is used by the trustee to acquire shares under the terms of the employee share purchase agreement; and an amount that is less than or equal to the payment used by the trustee would be income of an employee under section CE 1(d).
(b) (4) (5) Indirect settlement A person may make the transfer or provision in subsection (2) directly or indirectly, or by 1 transaction or a number of transactions, whether connected or otherwise.

Nil value of beneﬁciary relationship The fact that a person is, or will become, a beneﬁciary of a trust does not constitute the giving or receiving of value.
Deﬁned in this Act: amount, assessable income, Commissioner, consolidation rules, employee, employer, foreign superannuation scheme, income, pay, resi- dent in New Zealand, settlor, share, share purchase agreement, superannuation fund, transfer of value, trust rules, trustee Compare: 2004 No 35 ss HH 1(10), OB 1 settlor 1495 Part H s HC 28 Income Tax Act 2007 Reprinted as at 1 January 2010 Section HC 27(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 264(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HC 27(3B) heading: inserted (with effect on 1 April 2008), on 7 De- cember 2009, by section 44(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 27(3B): inserted (with effect on 1 April 2008), on 7 December 2009, by section 44(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section HC 27 list of deﬁned terms amount: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 27 list of deﬁned terms assessable income: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Conse- quential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section HC 27 list of deﬁned terms Commissioner: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequen- tial Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 27 list of deﬁned terms income: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section HC 27 list of deﬁned terms share: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 27 list of deﬁned terms share purchase agreement: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section HC 27 list of deﬁned terms trustee: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

HC 28 Activities treated as those of settlor When this section applies This section applies for the purposes of the trust rules to de- scribe certain activities of a person that result in the person being treated as a settlor.
Avoidance A person is treated as a settlor if, in relation to a trust,— (a) they act, refrain from acting, or enter into a transaction or a series of transactions; and what is done or not done has the effect of defeating the intent and application of the trust rules.
(b) (1) (2) 1496 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 29 (3) (4) (5) (6) Shareholders in controlled foreign companies A person is treated as a settlor of a trust if a controlled foreign company (CFC) settles an amount on a trust, and the person has a control interest of 10% or more in the CFC.
Shareholders in companies A person is treated as a settlor of a trust if— (a) (b) a company settles an amount on the trust; and the company would have been a CFC at the date of settlement if it had been a foreign company at the time; and the person would be treated as having a control interest of 10% or more in the company, if the company had been a foreign company.
(c) Second trusts A person is treated as a settlor of a trust (the sub-trust) if— they are a settlor of a trust (the head-trust); and (a) a trustee of the head-trust settles an amount on the sub- (b) trust, or makes a distribution to, or on terms of the sub- trust.
Control over trustee or settlor A person is treated as a settlor of a trust if— (a) they acquire, directly or indirectly, rights or powers in relation to a trustee or a settlor of the trust; and the acquisition has the purpose or effect of enabling them to require the trustee to treat them, or a nominee, as a beneﬁciary of the trust.
(b) Deﬁned in this Act: amount, business, CFC, company, control interest, distri- bution, foreign company, nominee, settlement, settlor, shareholder, trust rules, trustee Compare: 2004 No 35 ss HH 1(1)–(4), (8), (10), OB 1 settlor HC 29 Settlors’ liability to income tax (1) When this section applies This section applies to a person who makes a settlement to or for the beneﬁt of a trust after 17 December 1987, and the settlor is resident in New Zealand in an income year.
It applies whether or not they settled property on the trust on or before that date.

Subsections (3) and (4) override this subsection.

1497 Part H s HC 29 Income Tax Act 2007 Reprinted as at 1 January 2010 Liable as agent If a trustee of the trust derives trustee income in the income year, the settlor is liable as agent of the trustee for income tax payable by the trustee.

For a trust with more than 1 settlor, the liability is joint and several.
However, this subsection does not apply to income tax that the trustee is liable for as agent under section HC 32.

Exclusion: resident trustee This section does not apply if the trust has a resident trustee for the full income year or, if the ﬁrst settlement on the terms of the trust is made during the income year, from the day on which the settlement is made to the end of the income year.
Exclusion: trust types This section does not apply to the settlor of— (a) (b) (c) a charitable trust; or a superannuation fund; or a trust to the extent to which trustee income is derived from the settlor’s remitting an amount under a ﬁnancial arrangement to which section EW 31 or EZ 38 (which relate to base price adjustments) applies.
Exclusion: settlor not resident at time of settlement This section does not apply if the settlor is a natural person who, unless they make an election under section HC 33,— (a) is not resident in New Zealand at the time of any settle- ment on the trust; and had not after 17 December 1987 previously been resi- dent in New Zealand.
(b) Exclusion: other settlor more appropriately liable This section does not apply to the extent to which the settlor establishes, through full disclosure to the Commissioner of the settlements made, that another person who has settled property on the trust should be liable, having regard to the respective settlements made.
Limited effect of disclosure Subsection (6) does not apply to determine whether the tax obligations in relation to the trustee’s income tax liability are (2) (3) (4) (5) (6) (7) 1498 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 30 met for the purposes of section HC 10(1)(a)(ii) and meeting the requirements for a complying trust.
Deﬁned in this Act: agent, amount, charitable trust, Commissioner, comply- ing trust, ﬁnancial arrangement, income tax, income tax liability, income year, pay, resident in New Zealand, settlement, settlor, superannuation fund, trustee, trustee income Compare: 2004 No 35 s HH 4(4), (5) Treatment of transition situations HC 30 Treatment of foreign trusts when settlor becomes resident (1) (2) (3) What this section applies to This section applies for the purposes of section HC 15 and the deﬁnition of taxable distribution when— (a) a settlor of a trust is a natural person who on a day (the transition date)— (i) becomes resident in New Zealand and is not a transitional resident: stops being a transitional resident and continues to be a New Zealand resident; and (ii) (b) the trust would be a foreign trust in relation to a distri- bution if a distribution were made immediately before the settlor became resident.
Choosing to satisfy tax liability A settlor, trustee, or beneﬁciary of the trust may choose to satisfy the income tax liability of the trustee under section HC 33.

They must make the election by the election expiry date.
Tax consequences of making election If an election under subsection (2) is made, the trust is treated as follows: (a) as a foreign trust to the extent to which the distribution consists of an amount derived by the trustee before the date of the election: as a complying trust to the extent to which the distri- bution consists of an amount derived by the trustee on or after the date on which the election is made, if the requirements of section HC 10(1)(a) are met for the trustee income derived after the date of the election: (b) 1499 Part H s HC 31 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) as a non-complying trust if the election is made but the requirements of section HC 10(1)(a) are not met, for any distribution not within paragraph (a).
(4) (5) (6) Tax consequences when no election made If an election under subsection (2) is not made, the trust is treated as follows: (a) as a foreign trust to the extent to which the distribution consists of an amount derived by the trustee before the date of the election: as a non-complying trust to the extent to which a distri- bution consists of an amount derived by the trustee on or after the election expiry date.
(b) Election expiry date In this section, the election expiry date is the day that is the ﬁrst anniversary of the transition date.
Calculating income derived before election or election expiry date For the purposes of subsections (3) and (4), the amount derived in the part of the income year before the person makes the election, or before the election expiry date, as applicable, is at the option of the person either— (a) (b) the amount actually derived in the part year; or an amount calculated using the formula— Deﬁned in this Act: amount, complying trust, distribution, election expiry date, foreign trust, income tax liability, income year, non-complying trust, resident in New Zealand, settlor, taxable distribution, transitional resident, trustee Compare: 2004 No 35 s HH 2 Valuation of property, trading stock, and ﬁnancial arrangements HC 31 When existing trusts come into tax base When this section applies This section applies if, through a change in circumstances, an amount derived by a trustee of a trust on a day in an income (1) 1500 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 31 year is assessable income when it would not have been assess- able income had it been derived before that day.
Examples of a change in circumstances are— (a) a non-resident settlor becomes resident in New Zealand, section HC 30: a charitable trust loses its charitable status, section HC 13.

(b) Person able to make choice The choice given in subsections (3) and (4) is to be made by the person who is liable to satisfy the income tax liability of the trustee.
Establishing cost of trust property For the purposes of this Act, the cost of premises, plant, equip- ment, and trading stock of the trust at the date of the change in circumstances is either— (a) the historical cost of the property or trading stock less accumulated depreciation loss, or other value, no higher than market value, that the trustee used at that date for income tax purposes in a country or territory in which the trustee is liable to pay income tax on trustee income; or the value that would be used at that date under this Act, calculated as if the trustee income derived by the trustee had always been assessable income.
(b) Consideration for ﬁnancial arrangements For the purposes of this Act, the consideration for a ﬁnancial arrangement of the trust at the date of the change in circum- stances is either— (a) the market value of the ﬁnancial arrangement on that date; or the value calculated using the formula— (b) consideration paid to person + expenditure − consideration paid by person − income.
Deﬁnition of items in formula In the formula,— (a) consideration paid to person is the consideration that is paid to the person before the date: 1501 (2) (3) (4) (5) Part H s HC 32 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) (d) expenditure is the expenditure that would have been incurred under the ﬁnancial arrangements rules before the date: consideration paid by person is the consideration that is paid by the person before the date: income is the income that would have been derived under the ﬁnancial arrangements rules before the date.
Non-resident passive income For the purposes of subsections (1) and (3)(b), assessable in- come does not include an amount derived only as non-resident passive income.
Deﬁned in this Act: amount, assessable income, business, charitable trust, consideration, depreciation loss, ﬁnancial arrangement, ﬁnancial arrangements rules, income, income tax, income tax liability, income year, non-resident, non-resident passive income, pay, resident in New Zealand, settlor, trading stock, trustee, trustee income Compare: 2004 No 35 s HH 5 (6) Rate and payment of income tax HC 32 Liability of trustee as agent When this section applies This section applies in an income year when a beneﬁciary of a trust derives an amount of beneﬁciary income or a taxable distribution.
Exclusion Subsection (1) does not apply to a person who derives an amount from a community trust.

Agency In their capacity as agent, the trustee must satisfy the income tax liability of the beneﬁciary for their beneﬁciary income and taxable distributions derived.

Relationship to other provisions Section HD 4(b) (Treatment of principals) overrides this sec- tion.
Deﬁned in this Act: agent, amount, beneﬁciary income, community trust, in- come tax liability, income year, taxable distribution, trustee Compare: 2004 No 35 ss HH 3(2), HK 3(1A) (1) (2) (3) (4) 1502 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 34 Section HC 32(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 265(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HC 33 Choosing to satisfy income tax liability of trustee (1) (2) (3) (4) Election to satisfy tax liability A person who is a trustee, settlor, or beneﬁciary of a trust may choose to satisfy the income tax liability of the trustee of the trust.

Liability of person making election The person making the election is liable for the income tax payable by the trustee, other than income tax that the trustee is liable for as agent.
Application of election The election under subsection (1) may apply either for an in- come year or from the date on which it is made.

It then applies for all following income years.

Time of providing election The person must notify the Commissioner of an election under subsection (1) within the time allowed for ﬁling a return of income for the income year.

If section HC 30 applies, they must give notiﬁcation by the election expiry date.
Deﬁned in this Act: agent, Commissioner, election expiry date, income tax, income tax liability, income year, notify, pay, return of income, settlor, trustee Compare: 2004 No 35 s HH 4(7) HC 34 Taxable distributions from non-complying trusts (1) Rate of tax Income tax is imposed on a taxable distribution derived by a person in an income year from a non-complying trust under section BF 1(b) (Other obligations) at the basic rate set out in schedule 1, part A, clause 4 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts).
1503 Part H s HC 35 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Due date The income tax is payable on the person’s payment date for terminal tax under section RA 13 (Payment dates for terminal tax) for the corresponding tax year.
Deﬁned in this Act: income tax, income year, non-complying trust, pay, taxable distribution, terminal tax Compare: 2004 No 35 s HH 3(4) Section HC 34(1): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

HC 35 Beneﬁciary income of minors When this section applies This section applies when a person who is a minor derives an amount of beneﬁciary income from a trust in an income year.
Subsection (4) and sections HC 36 and HC 37 override this subsection.

Treatment of amount derived The amount is— (a) (b) excluded income of the minor under section CX 58 (Amounts derived by minors from trusts): treated as trustee income for the purposes of determin- ing the rate of tax that applies, who pays the relevant tax, and who provides the return of income.
Meaning of minor For the purposes of this section, and sections HC 36, HC 37, LE 4, and LF 2 (which relate to the treatment of tax credits of beneﬁciary minors), a minor is a natural person resident in New Zealand who is under 16 years of age on the trust’s balance date for the income year.
Exclusions This section does not apply— (a) if the total amount of beneﬁciary income that the minor derives from the trust in the income year is $1,000 or less; or to beneﬁciary income derived— (i) from a trust settled in the way described in sec- tion HC 36: (b) (1) (2) (3) (4) 1504 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 36 (ii) (iii) (iv) (v) from a testamentary trust described in section HC 37: from a Maori authority: directly from a group investment fund: by a person for whom a child disability allowance is paid under the Social Security Act 1964.
(5) Relationship with other provisions This section overrides sections HC 5, HC 18 to HC 20, HC 22, HC 23, and HC 32.
Deﬁned in this Act: amount, beneﬁciary income, excluded income, group investment fund, income year, Maori authority, minor, pay, resident in New Zealand, return of income, settlement, trustee, trustee income Compare: 2004 No 35 ss HH 3A–HH 3C, HH 3E, HH 3F(2), (2A) Section HC 35(4)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 266(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HC 36 Trusts and minor beneﬁciary rule (1) Trusts excluded from application of minor beneﬁciary rule Section HC 35(2) does not apply to an amount of beneﬁciary income derived by a minor if all settlements on the trust were made by— (a) a person who is neither a relative or a guardian of the minor, nor a person associated with a relative or a guardian; or a person who is a relative, guardian, or a person associ- ated with a relative or guardian, if— (i) (b) (ii) (iii) the settlor is acting as agent of the minor and has received the property from a person other than a relative, guardian, or their associate: the settlor is required by a court order to pay damages or compensation to the minor: the minor is a protected person, as deﬁned in sec- tion 2 of the Domestic Violence Act 1995, in re- lation to a protection order, and the settlement, whether made jointly with another person or not, is made before the protection order is made or during the time the order is in force.
1505 Part H s HC 36 Income Tax Act 2007 Reprinted as at 1 January 2010 When some settlements do not meet requirements Subsection (3) applies when more than 1 settlement is made on a trust, and 1 or more but not all settlements meet the re- quirements of subsection (1) or section HC 37(1).
Small additional settlements permitted Section HC 35(2) does not apply to an amount of beneﬁciary income derived by a minor if the only settlements that do not meet the requirements are made through— (a) the disposal for less than market value of property whose total value is no more than $5,000 at the end of the trust’s income year, valuing each settlement at the date of settlement; or providing ﬁnancial assistance for less than market value in the form of a loan whose total value is no more than $1,000 on any day in the trust’s income year.
(b) Exclusion if signiﬁcant services provided to trust Subsection (3) does not apply if services are provided to the trust by a relative, guardian, or associated person, unless those services are incidental to the operation of the trust.

Examples of incidental services are bookkeeping, accounting, or trustee services.
Some deﬁnitions In this section,— associated person or person associated does not include a person associated only under sections YB 9 to YB 11 (which relate to relatives who are treated as being associated persons) ﬁnancial assistance may include assistance through a loan, guarantee, security, or in another way, and ﬁnancial assistance is treated as having been provided to, or for the beneﬁt of, a trust for less than market value if— (a) (b) the assistance is provided at below market rates; or an amount payable for the assistance is payable on de- mand and the right to demand is not exercised or is de- ferred guardian has the meaning set out in section 15 of the Care of Children Act 2004, and persons are connected by guardianship (2) (3) (4) (5) 1506 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HC 37 (b) (c) if 1 is the guardian of the other, but guardian does not include a guardian appointed under— (a) section 110(1)(a) to (d) of the Children, Young Persons, and their Families Act 1989; or section 31 of the Care of Children Act 2004; or section 53 of the Public Trust Ofﬁce Act 1957 by a court order; or section 7(4) of the Adoption Act 1955 (d) relative means a person referred to in paragraph (c) of the def- inition of relative in section YA 1 (Deﬁnitions) extended to include being in a marriage, civil union, or de facto relation- ship with a person connected to the other through adoption, as described in paragraph (c)(iv), or guardianship.
Deﬁned in this Act: agent, amount, associated person, beneﬁciary income, ﬁ- nancial assistance, guardian, income year, loan, minor, pay, relative, settlement, settlor Compare: 2004 No 35 ss HH 3C(1)(a)–(d), (2), (3), HH 3D, HH 3F(1), (2A)–(4) HC 37 Testamentary trusts and minor beneﬁciary rule (1) (2) Testamentary trusts not subject to minor beneﬁciary rule Section HC 35(2) does not apply to an amount of beneﬁciary income derived by a minor if all the settlements on the trust were made under a will, codicil, intestacy, or court variation and— (a) the minor is alive within 12 months of the date of the settlor’s death; or the minor has a brother, sister, half-brother, or half-sis- ter alive within 12 months of the date of the settlor’s death.
(b) Small additional settlements permitted Section HC 36(3) may apply to extend the application of this exemption.
Deﬁned in this Act: amount, beneﬁciary income, minor, settlement, settlor Compare: 2004 No 35 s HH 3C(1)(e) 1507 Part H s HD 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Subpart HD—Agents Introductory provisions HD 1 What this subpart does (1) (2) When this subpart applies This subpart sets out the circumstances in which a person is treated for the purposes of this Act and the Tax Administration Act 1994 as an agent of another person in relation to the tax obligations of that other person.
Provisions relating to agents The following provisions in other subparts of this Act set up certain agency relationships for income tax purposes, or pro- vide certain tax consequences and requirements of an agency relationship: (a) section EY 49(5) (Non-resident life insurer becoming resident): sections FM 34(2) (Nominated companies): sections FN 6(3) (Nominated companies): section HA 8 (Shareholders’ personal liability): section HC 29(3) (Settlors’ liability to income tax): section HC 32 (Liability of trustee as agent): section LB 2 (Tax credits for provisional tax payments): section RA 9 (Treatment of amounts withheld as re- ceived): sections RE 4, RE 5, and RE 7 to RE 9 (which relate to requirements for agents or trustees to pay RWT): section RE 22 (When payment treated as non-resident passive income): section RF 4 (Non-resident passive income received by agents and others): section YA 1 (Deﬁnitions), the deﬁnition of offered or entered into in New Zealand.
(b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Deﬁned in this Act: agent, income tax, offered or entered into in New Zealand, tax Compare: 2004 No 35 s HK 1(1) HD 2 Joint liability of principal and agent for tax obligations A principal and an agent are jointly and severally liable for the tax obligations relating to the agency, and the Commissioner 1508 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HD 4 may issue an assessment for the same tax to both an agent and their principal.
The liability of 1 remains despite an assess- ment of the other.

Deﬁned in this Act: agent, assessment, Commissioner, tax Compare: 2004 No 35 ss HK 3(2), HK 7(1) HD 3 Agents’ duties and liabilities (1) (2) (3) (4) When this section applies This section applies for the purposes of sections HD 8 to HD 27 in relation to all income derived by a principal through a business carried on in New Zealand by an agent.
Assessments, returns, and payment of tax The agent must— (a) make the assessments that their principal is required to make; and provide all returns required of their principal under the Tax Administration Act 1994; and satisfy their principal’s income tax liability.

(b) (c) Joint and several liability If 2 or more persons are liable as agents in relation to the same tax, the liability is joint and several.
Agent as separate person The agent is treated in that capacity as a separate person, and may claim in relation to the agency income only those tax credits or exemptions to which the principal is entitled.
Deﬁned in this Act: agent, assessment, business, income, income tax liability, New Zealand, return of income, tax, tax credit Compare: 2004 No 35 ss HK 1, HK 3(3), HK 7(1) HD 4 Treatment of principals Despite section HD 3,— (a) a principal remains liable for their tax obligations, and is not released from them merely through the existence of the agency; and 1509 Part H s HD 5 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) if the Commissioner agrees, the principal and the agent may decide that the principal is to undertake the duties set out in section HD 3(2).
Deﬁned in this Act: agent, Commissioner, tax Compare: 2004 No 35 s HK 3(1), (1A) HD 5 Matters between principals and agents Assessment as authority The Commissioner’s assessment is, as between principal and agent, sufﬁcient authority for the payment of tax by the agent.
Recovering payment On paying tax, an agent is entitled to be reimbursed by the principal, and may— (a) (b) recover the amount from the principal; or subtract the amount from money held by the agent that belongs or is payable to the principal.

Retaining funds For the purposes of paying tax in relation to which an agent is or may become liable, the agent may retain from money that belongs or is payable to the principal an amount that is reasonably sufﬁcient to pay the tax.
This subsection applies at a time in an income year in which the tax is due or in a later income year.

Hardship The Commissioner may set a new due date for an agent to pay a tax liability if— the agent— (a) (i) is unable to pay the tax liability out of money that the agent holds that belongs to the principal; and has not paid away an amount after being assessed in relation to the agency; and (ii) (b) the enforcement of payment would cause hardship to the agent.
Deﬁned in this Act: agent, amount, assessment, Commissioner, income year, pay, tax Compare: 2004 No 35 ss HK 4–HK 6, HK 7(2) (1) (2) (3) (4) 1510 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HD 9 HD 6 When relationship effectively that of principal and agent If a person who is carrying on business in New Zealand is sufﬁciently under the control of another person in business, whether in New Zealand or elsewhere, so that the relationship between them is effectively that of principal and agent, the Commissioner may treat the ﬁrst business as the principal’s business carried on by the agent on behalf of the principal.
Deﬁned in this Act: agent, business, Commissioner, control, New Zealand Compare: 2004 No 35 s HK 8 HD 7 Rate and amount of tax The rate of tax used to calculate an agent’s income tax liability is determined by reference to the taxable income of the prin- cipal.

The amount of income tax payable is the amount deter- mined by the amount of agency income as a proportion of the taxable income of the principal.
Deﬁned in this Act: agent, amount, income tax, income tax liability, pay, tax- able income Compare: 2004 No 35 s HK 2 HD 8 Circumstances giving rise to agency Particular cases For the purposes of this Act and the Tax Administration Act 1994, a person is treated as an agent in relation to the income of another person to the extent described in the circumstances set out in sections HD 9 to HD 15.
Deﬁned in this Act: agent, income HD 9 Guardians A person (person A) is treated as an agent of another person (person B) if, as guardian, manager, or otherwise, person A receives, controls, or disposes of income that person B derives while under a legal disability.
Deﬁned in this Act: agent, income Compare: 2004 No 35 s HK 9 1511 Part H s HD 10 Income Tax Act 2007 Reprinted as at 1 January 2010 HD 10 Mortgagees in possession A person (person A) is treated as an agent of another per- son (person B) if, as mortgagee in possession of land or other property, person A derives income from the land or property on behalf or for the beneﬁt of person B as mortgagor.
Deﬁned in this Act: agent, income, land Compare: 2004 No 35 s HK 10 HD 11 Nominated companies (1) (2) Consolidated groups A nominated company is treated under section FM 34(2) (Nominated companies) as the agent of a consolidated group, and of each company that is at the time a member of that group.

Imputation groups A nominated company is treated under section FN 6(3) (Nom- inated companies) as the agent of an imputation group, and of each company that is at the time a member of that group.
Deﬁned in this Act: agent, company, consolidated group, imputation group, nominated company Compare: 2004 No 35 ss FD 6(1), FDA 5(3) HD 12 Trusts Beneﬁciary income and taxable distributions If a beneﬁciary of a trust, other than a beneﬁciary of a commu- nity trust, derives an amount of beneﬁciary income or taxable distribution in a tax year, the trustee of the trust is treated under section HC 32 (Liability of trustee as agent) as the agent of the beneﬁciary.
Settlors If a trustee of a trust, other than a charitable trust, derives trustee income in a tax year, and a settlor of the trust is resi- dent in New Zealand in the tax year, the settlor is treated under section HC 29 (Settlors’ liability to income tax) as the agent (1) (2) 1512 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HD 14 of the trustee for income tax payable by the trustee (but not for income tax that the trustee is liable for as agent).
Deﬁned in this Act: agent, amount, beneﬁciary income, charitable trust, com- munity trust, income tax, pay, resident in New Zealand, settlor, tax year, taxable distribution, trustee, trustee income Compare: 2004 No 35 ss HH 3(2), HH 3A(2), HH 4(4) HD 13 Unit trusts A trustee of a unit trust is treated as an agent of the unit trust in relation to income derived by the unit trust.
Deﬁned in this Act: agent, income, trustee, unit trust Compare: 2004 No 35 s HE 1 HD 14 Companies issuing debentures (1) (2) Agency A company is treated as an agent of a person if— (a) (b) the company has issued a debenture; and the person, as a debenture holder, derives income from the debenture.
Excluded debentures Subsection (1) does not apply to a debenture if— (a) it is a proﬁt-related debenture or substituting debenture to which section FA 2 (Recharacterisation of certain debentures) applies or a stapled debt security to which section FA 2B (Stapled debt securities) applies; or it is issued to a New Zealand resident, and the company provides the Commissioner with a certiﬁed list contain- ing particulars of the debentures, the name and details of each person to whom a debenture has been issued, and details of the interest payments before an assessment is made in a tax year of the debenture holder.
(b) (3) (4) Liability of persons named A person named as a debenture holder in the list referred to in subsection (2)(b) is liable for income tax on income derived from the debenture.

Subsection (4) overrides this subsection.


Continuing liability until notiﬁcation Despite section BB 2 (Main obligations), if a debenture holder disposes of a debenture, they remain liable for income tax un- 1513 Part H s HD 15 Income Tax Act 2007 Reprinted as at 1 January 2010 (5) (6) less they notify the Commissioner of the disposal before an assessment is made in a tax year that takes into account the income derived from the debentures.
On notiﬁcation, the sub- sequent holder is liable in relation to the debentures, and the liability of the transferor is ended.

Recovery of tax paid If a person who formerly held a debenture pays income tax on taxable income that takes into account income derived by a subsequent holder, the income tax is treated as paid on behalf of the subsequent holder to the extent of the liability of the subsequent holder, and the person may recover that amount from them.
Matters not taken into account For the purposes of subsection (1), it does not matter whether the debenture is charged on the company’s property, nor whether a debenture holder is an absentee.
Deﬁned in this Act: absentee, agent, assessment, Commissioner, company, debenture, debenture holder, income, income tax, interest, New Zealand resi- dent, notify, pay, proﬁt-related debenture, stapled debt security, tax, tax year, taxable income Compare: 2004 No 35 ss HK 12, HK 13 Section HD 14(2)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 268(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HD 14 list of deﬁned terms stapled debt security: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 268(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HD 15 Asset stripping of companies When this section applies This section applies when— (a) (b) an arrangement has been entered into in relation to a company; and an effect of the arrangement is that the company cannot meet a tax liability (the tax obligation) whether existing at the time of the arrangement or arising after that time, for— (i) income tax: (1) 1514 Reprinted as at 1 January 2010 (ii) Income Tax Act 2007 Part H s HD 15 a civil penalty, as deﬁned in section 3(1) of the Tax Administration Act 1994: an amount payable under Part 7 of that Act; and (c) (iii) it is reasonable to conclude that— (i) (ii) a purpose of the arrangement is to have the effect described in paragraph (b); and if a director of the company at the time of the ar- rangement made reasonable inquiries, they could have anticipated at the time that the income tax liability would, or would likely, be required to be met.
(2) (3) When this section does not apply This section does not apply to an arrangement if— (a) (b) the Commissioner is a party to the arrangement: the tax obligation is no more than an amount of income tax that arises as a direct result of the performance of the arrangement, and that obligation has been met: at the time of the arrangement, the company was under statutory management under the Reserve Bank of New Zealand Act 1989 or the Corporations (Investigation and Management) Act 1989.
(c) Director’s liability All persons who are directors of the company at the time the arrangement is entered into are treated as agents of the com- pany in relation to the tax obligation, and the liability is joint and several.
But a director has no liability if— (a) they do not derive a beneﬁt from the arrangement, and at the ﬁrst reasonable opportunity after becoming aware of the arrangement, or the aspects of the arrangement that cause this section to apply to it, they record for- mally their dissent in relation to the arrangement with the company and with the Commissioner; or they were not at the relevant time involved in the execu- tive management of the company and had no knowledge of the arrangement, or the aspects of the arrangement that cause this section to apply to it.
(b) 1515 Part H s HD 15 Income Tax Act 2007 Reprinted as at 1 January 2010 Shareholder’s liability A person who is a controlling shareholder or an interested shareholder at the time of the arrangement is treated as an agent of the company in relation to the tax obligation other than penalties and interest but, despite section HD 3(2), the li- ability is limited to the greater of— (a) the market value of the person’s direct and indirect shareholding in the company at the time of the arrange- ment; and the value of the beneﬁt that the person derives from the arrangement.
(b) Shareholder’s liability for penalties and interest A person who is a controlling shareholder or an interested shareholder at the time of the arrangement is treated as an agent of the company in relation to penalties and interest in proportion to their liability for the tax obligation under sub- section (4).
Company liquidations In order to give effect to this section, if a company has been liquidated, the Commissioner may at any time after the liquid- ation make an assessment of a company for an income tax li- ability of the company as if it had not been liquidated.

The time bar applies, but this subsection overrides other provisions in this Act and the Tax Administration Act 1994.
Agents for purposes of notiﬁcation or objection procedures In making an assessment under subsection (6), the Commis- sioner must nominate 1 or more persons as having the tax obligation set out in the assessment.

The nominated person or persons are treated as agents of the company in relation to any notiﬁcation or objection procedure concerning the assess- ment.
When liability does not arise No liability arises under this section for a tax year in relation to which— (a) a company has provided returns within the time allowed by section 37 of the Tax Administration Act 1994 for providing returns for the tax year in which the company is liquidated; and (4) (5) (6) (7) (8) 1516 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HD 15 (b) the Commissioner has not issued a notice of assessment of the company for the tax year before the end of 4 years following the end of the tax year in which the company is liquidated.
(9) Some deﬁnitions In this section,— controlling shareholder, for a company, means— (a) (b) a person whose voting interest or market value interest in the company at the time of the arrangement, together with any interests of an associated person, is 50% or more; and if the person or associated person is a company, the vot- ing interest or market value interest of the person or as- sociated person is calculated as if they were not a com- pany and as if sections YC 4 (Look-through rule for cor- porate shareholders) and YC 6 (Disregarding certain se- curities) did not apply director means,— (a) (b) a person who occupies the position of director, whether or not the position has that title: for an entity that is treated as a company under this Act, a person who acts in the same or similar way as a dir- ector would if the entity were a company incorporated in New Zealand under the Companies Act 1993 interested shareholder means a person who, at the time the arrangement is entered into, has a voting interest or market value interest in the company, calculated in either case if the person is a company as if the person were not a company, and because of the size of the beneﬁt that the person derives from the arrangement, it is reasonable to conclude that the person is a party to the arrangement penalties and interest means a civil penalty or amount payable under Part 7 of the Tax Administration Act 1994 that is part of the tax obligation.
Deﬁned in this Act: agent, amount, arrangement, assessment, associated per- son, Commissioner, company, controlling shareholder, director, income tax, income tax liability, interested shareholder, liquidation, market value, market value interest, New Zealand, notice, notify, penalties and interest, return of in- come, tax, tax year, time bar, voting interest Compare: 2004 No 35 s HK 11 1517 Part H s HD 16 Income Tax Act 2007 Reprinted as at 1 January 2010 HD 16 Non-resident general insurers When this section applies This section applies when an insurer derives income under sec- tion CR 3 (Income of non-resident general insurer) to deter- mine who is liable to provide a return of income and pay in- come tax on the income.
Insurer To the extent to which the insurer provides the return and pays the income tax, no other person described in this section is liable to do so.

Person acting on insurer’s behalf To the extent to which a person on behalf of the insurer, in- cluding a broker or other agent who pays a premium on behalf of another person, provides the return and pays the income tax, no agent described in any of subsections (4) to (6) is liable to do so.
Agent paying premium or providing funds The person liable in the ﬁrst place as an agent is— (a) a person, including a broker or agent, who pays the pre- mium to the insurer or to some other person not carrying on a business in New Zealand through a ﬁxed establish- ment in New Zealand; or a person described in subsection (7)(b).

(b) Person paying premium The person liable in the second place as agent is a person who pays the premium, whether or not through a broker or agent.
Insured person The person liable in the third place as agent is the insured per- son.
Bank or building society If a premium is paid by a registered bank, as deﬁned in section 2 of the Reserve Bank of New Zealand Act 1989, or a building society on behalf of a person to the insurer or to some other person not carrying on a business in New Zealand through a ﬁxed establishment in New Zealand,— (a) the bank or building society is not an agent of the in- surer; and (1) (2) (3) (4) (5) (6) (7) 1518 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HD 18 (b) the person who provides the bank or building society with the funds from which the premium is paid is an agent of the insurer.
Deﬁned in this Act: agent, building society, business, ﬁxed establishment, in- come, income tax, insured person, insurer, New Zealand, pay, premium, regis- tered bank, return of income Compare: 2004 No 35 s FC 16 HD 17 Agent paying premiums to residents of Switzerland (1) (2) When this section applies This section applies when— (a) (b) (c) an insurer derives income under section CR 3 (Income of non-resident general insurer); and an agent of the insurer under section HD 16 pays the premium to an insurer or to some other person not carry- ing on a business in New Zealand through a ﬁxed estab- lishment in New Zealand; and the insurer or other person is treated as being resident in Switzerland for the purposes of a double tax agree- ment between the government of New Zealand and the government of Switzerland.
Disclosure The agent must disclose details of the payment of the premium to the Commissioner in the manner, if any, required by the Commissioner.
Deﬁned in this Act: agent, business, Commissioner, double tax agreement, ﬁxed establishment, income, insurer, New Zealand, pay, premium Compare: 2004 No 35 s FC 17 Absentees HD 18 Agency in relation to absentees generally (1) What sections HD 19 to HD 25 do Sections HD 19 to HD 25 apply for the purposes of this Act to treat a person as an agent in relation to the income of an absentee when certain conditions are met and to the extent set out in the circumstances described in those sections.
The person must meet the tax obligations set out in section HD 3 in relation to the income to which the agency applies.
1519 Part H s HD 19 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Meaning of absentee In this subpart, absentee means— (a) (b) (c) a natural person who is for the time being out of New Zealand: a foreign company, unless it has a ﬁxed and permanent place of business in New Zealand at which it carries on business in its own name: a foreign company when the Commissioner declares that it is an absentee for the purposes of this Act by giv- ing notice to the company, or its agent or representative in New Zealand.
Deﬁned in this Act: absentee, agent, business, Commissioner, company, for- eign company, income, New Zealand, notice, tax Compare: 2004 No 35 ss HK 1, HK 16, OB 1 absentee HD 19 Persons receiving absentees’ income A person is treated as an agent if they receive, control, or dis- pose of income derived by a principal who is an absentee.
Deﬁned in this Act: absentee, agent, control, income Compare: 2004 No 35 s HK 20 HD 20 Persons carrying on business for absentees A person is treated as an agent if they carry on in New Zealand a business for an absentee, whether or not the income is re- ceived by the agent.

Deﬁned in this Act: absentee, agent, business, income, New Zealand Section HD 20: substituted, on 1 April 2008, by section 18(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
HD 20B General partners and partners carrying on with or (1) managing business involving absentees This section applies to a person who— (a) (b) in New Zealand carries on a business in a partnership that is not a limited partnership: is a general partner of a limited partnership that carries on a business in New Zealand ignoring section HG 2 (Partnerships are transparent).
(2) If the person carries on the business with an absentee or, as a general partner, is responsible for the management of a limited 1520 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HD 22 partnership in which a limited partner is an absentee, the per- son is treated as the agent of the relevant absentee in relation to the absentee’s partnership share of the partnership’s income under section HG 2.
Deﬁned in this Act: absentee, agent, business, general partner, income, limited partner, limited partnership, New Zealand, partnership, partnership share Section HD 20B: inserted, on 1 April 2008, by section 18(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
HD 21 Companies (1) (2) Paying dividends A company incorporated in New Zealand is an agent of an ab- sentee to whom it pays or credits dividends as a shareholder, or as a holder of a debenture to which section FA 2 (Rechar- acterisation of certain debentures) applies.

Relationship with NRWT rules section RF 2(3) and (4) (Non-resident passive income) over- rides this section.
Deﬁned in this Act: absentee, agent, company, debenture, debenture holder, dividend, New Zealand, NRWT rules, pay, shareholder Compare: 2004 No 35 s HK 21 HD 22 Banking companies (1) (2) (3) Receiving deposit in course of business activities A person, including a banking or other company, or a local au- thority or public authority, is treated as an agent if in the course of their business activities, they receive or hold money as a de- posit and pay interest to an absentee on the money deposited by the absentee.
Threshold This section applies only if the interest paid on the deposit is more than $100.

Relationship with NRWT rules section RF 2(3) and (4) (Non-resident passive income) over- rides this section.
Deﬁned in this Act: absentee, agent, banking company, business, company, interest, local authority, NRWT rules, pay, public authority Compare: 2004 No 35 s HK 23 1521 Part H s HD 23 Income Tax Act 2007 Reprinted as at 1 January 2010 HD 23 Trustees of group investment funds A person is treated as an agent if they are a trustee of a group investment fund and an absentee is an investor to whom a divi- dend is paid.
Deﬁned in this Act: absentee, agent, dividend, group investment fund, pay, trustee Compare: 2004 No 35 s HK 22 HD 24 Shipping businesses A person is treated as an agent if they are the master of a ship owned by or under charter to an absentee who carries on a business carrying goods or passengers.
Deﬁned in this Act: absentee, agent, business Compare: 2004 No 35 s HK 18(1) HD 25 Persons remitting amounts outside New Zealand (1) (2) Absentee landlords, mortgagors, or creditors A person is treated as an agent if they are a tenant, mortgagor, or other person who remits an amount from New Zealand to an absentee who is their landlord, mortgagee, or creditor, when the amount is income derived by the absentee.
But this sub- section applies only after the Commissioner has notiﬁed the person that they are accountable as the absentee’s agent.

When fund outside New Zealand If the amount referred to in subsection (1) is paid by or on ac- count of a person resident in New Zealand from a fund outside New Zealand, it is treated as an amount to which this section applies.
Deﬁned in this Act: absentee, agent, amount, Commissioner, income, New Zealand, notify, pay, resident in New Zealand Compare: 2004 No 35 s HK 19 HD 26 Agency in relation to non-residents generally Non-residents What sections HD 27 and HD 28 do sections HD 27 and HD 28 apply for the purposes of this Act to treat a person as an agent in relation to the income of a non-resident taxpayer when certain conditions are met.
The (1) 1522 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HD 28 person must meet the tax obligations set out in section HD 3 in relation to the income to which the agency applies.

(2) Meaning of non-resident taxpayer In sections HD 27 and HD 28, a non-resident taxpayer means a person who— (a) is liable for income tax on employment income derived in New Zealand; and has no ﬁxed and permanent place to live in New Zealand.
(b) Deﬁned in this Act: agent, employment income, income, income tax, New Zealand, non-resident, non-resident taxpayer, tax Compare: 2004 No 35 s HK 24(1), (4) HD 27 Employers (1) (2) Employment of non-resident persons An employer who employs a non-resident person with an in- come tax liability is treated as an agent in relation to the em- ployment income derived in New Zealand by the non-resident person.
If the person does not meet their income tax liability, the employer must withhold the amount of income tax payable from their employment income and pay it to the Commissioner on the person’s behalf.

Employment by non-resident traders A non-resident trader who employs a person in New Zealand is treated as an agent in relation to the person’s employment income.

If the trader has an agent in New Zealand, the agent must meet the trader’s obligations under section HD 3.
Deﬁned in this Act: agent, amount, Commissioner, employer, employment in- come, income tax, income tax liability, New Zealand, non-resident, non-resi- dent trader, pay Compare: 2004 No 35 ss HK 24(2), HK 25 HD 28 Government pensions and payments under superannuation schemes If a non-resident person who has an income tax liability derives a pension or annuity from the government of New Zealand or under an unregistered superannuation scheme established in New Zealand, the income tax payable must be 1523 Part H s HD 29 Income Tax Act 2007 Reprinted as at 1 January 2010 withheld from 1 or more instalments of the pension or annuity and paid to the Commissioner on the person’s behalf.
Deﬁned in this Act: Commissioner, income tax, income tax liability, New Zealand, non-resident, pay, superannuation scheme Compare: 2004 No 35 s HK 24(3) HD 29 Persons buying goods from overseas Who this section applies to This section applies, in relation to a purchase of goods, to— (a) (b) a person in New Zealand (person A); and person A’s principal who is resident in a country or ter- ritory outside New Zealand, and not resident in New Zealand (person B).
Treatment of persons buying goods If person A is instrumental in arranging the purchase of goods from person B, and the goods are either in New Zealand or are to be imported into New Zealand under the contract of purchase, person A and person B and the income are treated as follows: (a) person B is treated as carrying on a business in New Zealand; and person A is treated as person B’s agent in relation to the income derived from the business; and the income from the business is treated as derived from New Zealand.
(b) (c) Exemption Person A is not liable as agent for the payment of income tax if the Commissioner is satisﬁed that in corresponding circum- stances in a country or territory outside New Zealand, person B, if resident in New Zealand, would not be liable for income tax in that country or territory.
Deﬁned in this Act: agent, business, Commissioner, derived from New Zealand, income, income tax, New Zealand, pay, resident in New Zealand Compare: 2004 No 35 s HK 26 (1) (2) (3) 1524 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HE 2 Subpart HE—Mutual associations HE 1 Income and deductions of mutual associations (1) (2) Income and allocation The treatment of amounts derived by mutual associations and from mutual associations is dealt with in— (a) section CB 33 (Amounts derived by mutual associ- ations); and section CB 34 (Amounts derived by members from mutual associations).
(b) Deductions and allocation The treatment of association rebates that a mutual association pays to a member is dealt with in section DV 19 (Association rebates).
Deﬁned in this Act: amount, association, association rebate, member HE 2 Classes of mutual transaction (1) (2) When mutual transactions arise In this subpart, and sections CB 33, CB 34, and DV 19 (which relate to income and deductions relating to mutual transac- tions), a mutual transaction arises when an association— (a) enters into a transaction with members of the associ- ation, or a transaction with members of the association and other persons; and the association takes the transaction into account in an income year in determining its net income or net loss under section BC 4 (Net income and net loss).
(b) Types of transaction For the purposes of subsection (1), a transaction between an association and its member includes 1 or more of the follow- ing: (a) the borrowing by the association of money from 1 or more members, to the extent to which the money is ap- plied as a loan to a member: the lending by the association of money to 1 or more members: for an association that is a statutory producer board other than a body that derives only exempt income— (i) a levy paid by 1 or more members: (b) (c) 1525 Part H s HE 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) a produce transaction.
Deﬁned in this Act: association, exempt income, income year, levy, loan, mem- ber, mutual transaction, net income, net loss, pay, produce transactions, statu- tory producer board Compare: 2004 No 35 s HF 1(8) HE 3 Association rebates (1) (2) Meaning In this subpart, and in sections CB 34 and DV 19 (which relate to income and deductions relating to mutual transactions), an association rebate means a payment by an association to a member that is made— (a) (b) through a distribution of proﬁts of the association: not later than 6 months after the end of the accounting year of the association in relation to which the payment is made.
Exclusion An association rebate does not include— (a) a cash distribution in relation to which the association has made an election under section OB 73(1) or OB 78(1) (which relate to imputation credits of statutory producer boards or co-operative companies); or a distribution described in section CD 26 (Capital dis- tributions on liquidation or emigration) or CD 33 (Pay- ments corresponding to notional distributions of pro- ducer boards and co-operative companies).
(b) Deﬁned in this Act: accounting year, association, association rebate, member, pay Compare: 2004 No 35 s HF 1(9) rebate HE 4 Apportionment when transactions with members and non-members When this section applies This section applies when an association takes into account transactions with both members and non-members.
Apportioning expenditure or loss In determining its net income or net loss for an income year under section BC 4 (Net income and net loss), the association must apportion the expenditure or loss that it incurs in the (1) (2) 1526 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HF 1 income year between those transactions with members, and those with persons who are not members.
Deﬁned in this Act: association, income year, loss, member, net income, net loss Compare: 2004 No 35 s HF 1(4) HE 5 Association rebates paid by shares or credit (1) (2) When this section applies This section applies when an association that enters into mu- tual transactions with members pays an association rebate to 1 or more members through— (a) issuing fully or partly paid-up shares in the association; or providing credit for all or part of an amount unpaid on shares in the association.
(b) Not bonus issue The amount, or the relevant part of it, is not treated as a bonus issue.

Deﬁned in this Act: amount, association, association rebate, bonus issue, mem- ber, mutual transaction, pay, share Compare: 2004 No 35 s HF 1(7) Subpart HF—Maori authorities Introductory provisions HF 1 Maori authorities and the Maori authority rules (1) (2) Who is a Maori authority?

A Maori authority is a person eligible under section HF 2 who has made an election under section HF 11.
Maori authority rules The Maori authority rules means the following: (a) (b) this subpart: sections GB 42 and GB 43 (which relate to Maori au- thority credit arrangements to obtain a tax advantage): sections LA 4, LA 6, LO 1, LO 4, and LO 5 (which relate to Maori authority credits): subpart OK (Maori authority credit accounts (MACA)): 1527 (c) (d) Part H s HF 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (e) (f) (g) section RM 22 to RM 27 (which relate to limits on refunds of tax in relation to Maori authorities): schedule 1, part A, clause 6 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts): sections 31, 57, 68B, 69B, 70B, 97B, 140CB, 140DB, and 181B of the Tax Administration Act 1994.
Deﬁned in this Act: Maori authority, Maori authority rules Compare: 2004 No 35 s OB 1 Maori authority, Maori authority rules Section HF 1(2)(f): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

HF 2 Who is eligible to be a Maori authority?

What this section does This section sets out the persons eligible to choose under sec- tion HF 11 to become a Maori authority.
Companies The following are eligible to make an election: (a) (b) (c) (d) a company established by an order made under Te Ture Whenua Maori Act 1993 (the Maori Land Act 1993): a company that owns land that is subject to Te Ture Whenua Maori Act 1993 (the Maori Land Act 1993): a company that is— (i) established by a mandated iwi organisation to be an asset-holding company, as contemplated by section 12(1)(d) of the Maori Fisheries Act 2004: recognised by Te Ohu Kai Moana Trustee Limited as a mandated iwi organisation under section 13(1) of the Maori Fisheries Act 2004: (ii) a company that,— (i) on behalf of Maori claimants, receives and man- ages assets that are transferred by the Crown as part of the settlement of a claim under the Treaty of Waitangi; and is contemplated by the deed of settlement of the claim as performing the functions described in subparagraph (i).
(ii) Trusts The following are eligible to make an election: (1) (2) (3) 1528 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HF 2 (a) (b) (c) (d) (e) the trustees of a trust established by an order made under Te Ture Whenua Maori Act 1993 (the Maori Land Act 1993): the trustees of a trust who own land that is subject to Te Ture Whenua Maori Act 1993 (the Maori Land Act 1993): the trustees of a trust that is recognised by Te Ohu Kai Moana Trustee Limited as a mandated iwi organisation under section 13(1) of the Maori Fisheries Act 2004: the trustees of trusts that are established by Te Ohu Kai Moana Trustee Limited as a mandated iwi organisation under sections 79 and 92 of the Maori Fisheries Act 2004: the trustees of a trust who,— (i) on behalf of Maori claimants, receive and man- age assets that are transferred by the Crown as part of the settlement of a claim under the Treaty of Waitangi; and are contemplated by the deed of settlement of the claim as performing the functions described in subparagraph (i).
(ii) (4) (5) (6) (7) Maori Trustee The Maori Trustee in the Maori Trustee’s capacity as an agent for an owner of land that is subject to Te Ture Whenua Maori Act 1993 (the Maori Land Act 1993) is eligible to make an election.

Maori Trust Board A Maori Trust Board, as deﬁned in section 2 of the Maori Trust Boards Act 1955, is eligible to make an election.
Crown Forestry Rental Trust The Crown Forestry Rental Trust, established by deed in ac- cordance with section 34 of the Crown Forest Assets Act 1989, is eligible to make an election.

Te Ohu Kai Moana Trustee Limited Te Ohu Kai Moana Trustee Limited, established under section 33 of the Maori Fisheries Act 2004, is eligible to make an election.
1529 Part H s HF 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (8) Aotearoa Fisheries Limited Aotearoa Fisheries Limited, established under section 60 of the Maori Fisheries Act 2004, is eligible to make an election.
Deﬁned in this Act: agent, company, Maori authority, trustee Compare: 2004 No 35 s HI 2 HF 3 Applying provisions to Maori authorities Relationship with provisions generally A provision in the Maori authority rules overrides any other provision in this Act that may apply to a Maori authority unless a provision speciﬁcally provides otherwise.
Relationship with company rules A Maori authority must not— (a) amalgamate with a company that is not a Maori author- ity; or be part of a consolidated group that includes a company that is not a Maori authority; or be a co-operative company if a shareholder is not a Maori authority.
(b) (c) Treatment of tax losses Under section IA 6 (Restrictions on companies grouping tax losses) and subpart IC (Grouping tax losses),— (a) a Maori authority may subtract from its net income some or all of a tax loss component or loss balance only of another Maori authority: a Maori authority may use some or all of its tax loss component or loss balance in relation to the net income only of another person who is a Maori authority.
Deﬁned in this Act: amalgamation, company, consolidated group, co-opera- tive company, loss balance, Maori authority, Maori authority rules, net income, shareholder, tax loss component Compare: 2004 No 35 s HI 1 (b) (1) (2) (3) 1530 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HF 4 Maori authority distributions HF 4 What constitutes a Maori authority distribution?
(1) (2) (3) (4) (5) (6) (7) Transfer of value A transfer of value from a Maori authority to a person is a Maori authority distribution if the cause of the transfer is the membership of the person in the Maori authority.
Distributions A Maori authority distribution includes an amount advanced to a member by a Maori authority, to the extent to which the advance is not a genuine investment by the authority entered into but in effect a distribution of an amount that falls within sections BD 1(1) and CA 1(2) (which relate to amounts that are income).

Taxable bonus issues A taxable bonus issue made by a Maori authority to a member is a taxable Maori authority distribution.
Exclusion: services A Maori authority distribution does not include the provision of services to a person by a Maori authority.

Distributions with credits attached A Maori authority distribution includes the amount of a Maori authority credit attached to it.

Dividends A Maori authority distribution that, but for this subsection, would be a dividend for a member, is treated as not being a dividend except for the purposes of section CW 10 (Dividend within New Zealand wholly-owned group).
Value of distribution by reference to market values For the purposes of this section, if the transfer of value is— (a) the disposal of property to a member without consider- ation, or for a consideration that is less than the market value of the property, the value of the Maori authority distribution is the amount by which the market value of the property is more than the consideration; and the acquisition of property from a member for a consid- eration that is more than the market value of the prop- erty, the value of the Maori authority distribution is the (b) 1531 Part H s HF 5 Income Tax Act 2007 Reprinted as at 1 January 2010 amount by which the market value is less than the con- sideration.
Deﬁned in this Act: amount, dividend, Maori authority, Maori authority credit, member, taxable bonus issue, taxable Maori authority distribution, transfer of value Compare: 2004 No 35 ss HI 4(1), (2), HI 5(4), HI 7 HF 5 Notional distributions of co-operative companies A Maori authority that is a co-operative company may make a notional distribution to a member under section OB 79 (Co- operative companies attaching imputation credits to notional distributions) as if a Maori authority credit were an imputation credit.
Deﬁned in this Act: co-operative company, imputation credit, Maori authority, Maori authority credit, member Compare: 2004 No 35 s HI 4(3) HF 6 Tax treatment of Maori authority distributions A Maori authority distribution to a member is— (a) income of the member under section CV 11 (Maori au- thorities), if the amount is— (i) (ii) (b) a taxable Maori authority distribution; or a notional distribution: exempt income of the member under section CW 55 (Maori authority distributions), if paragraph (a) does not apply.
Deﬁned in this Act: amount, exempt income, income, Maori authority, member, taxable Maori authority distribution Compare: 2004 No 35 s HI 5(1) HF 7 Taxable Maori authority distributions A Maori authority distribution is a taxable Maori authority distribution if the source is income of the Maori authority that is— (a) derived by the Maori authority in the 2004–05 income year or a later income year; and not exempt income of the Maori authority; and not a cash distribution made to a member in relation to a notional distribution for which the Maori authority has (b) (c) 1532 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HF 8 made an election under section OB 82 (When and how co-operative company makes election).
Deﬁned in this Act: exempt income, income, income year, Maori authority, member, taxable Maori authority distribution Compare: 2004 No 35 s HI 5(2), (3) HF 8 Proportional allocation If a Maori authority distribution consists of a taxable Maori authority distribution and another amount, the Maori authority must allocate an equal proportion of each type of distribution to every member to whom the distribution is made.
Deﬁned in this Act: amount, Maori authority, member, taxable Maori authority distribution Compare: 2004 No 35 s HI 6 Changing status Table HI—Consequences of change in entity status for purposes of Maori authority rules Row Entity Changing to Consequences 1 Company Maori authority The company stops being an ICA company, and the rules relating to the ending of ICA company status apply Retained earnings, accumulated proﬁts, and capital reserves are treated as an amount from which a distribution that is not a taxable Maori authority distribution may be made 1533 Part H s HF 8 Income Tax Act 2007 Reprinted as at 1 January 2010 Table HI—continued 2 Trust Maori authority 3 Maori authority Company that is not a Maori authority Trustee income is treated as an amount from which a distribution that is not a taxable Maori authority distribution may be made The Maori authority may transfer a credit balance in the Maori authority credit account to the company’s imputation credit account, and section OK 18 applies to a debit balance in the Maori authority credit account Taxable income derived by the Maori authority in the 2003-04 or an earlier tax year is available subscribed capital Row Entity Changing to Reverting to Conse- quences 5 Maori authority Maori authority Company that is not a Maori authority Market value cal- culations are re- quired under sec- tion HF 10.
The company must apply row 1 1534 Reprinted as at 1 January 2010 Table HI—continued Income Tax Act 2007 Part H s HF 9 6 Maori authority Maori authority Trust that is not a Maori authority Market value cal- culations are re- quired under sec- tion HF 10.

The company must apply row 2 How to use this table Read columns from left to right according to the row that ﬁts the situation.
HF 9 Treatment of companies and trusts that choose to apply this subpart (1) (2) (3) (4) Company becoming Maori authority If a company becomes a Maori authority in a tax year, the company must apply table H1, row 1.

Trust becoming Maori authority If a trust becomes a Maori authority in a tax year, the trustee must apply table H1, row 2.

Maori authority becoming company If a Maori authority is a company that stops being a Maori authority in a tax year, it must apply table H1, row 3.
Maori authority becoming trust If a Maori authority is a trust that stops being a Maori authority in a tax year, the trustee must apply table H1, row 4.
Deﬁned in this Act: company, Maori authority, tax year, trustee Compare: 2004 No 35 s HI 8 1535 Part H s HF 10 Income Tax Act 2007 Reprinted as at 1 January 2010 HF 10 Market value calculations (1) (2) (3) (4) When this section applies This section applies to property of a company or a trust when the company or the trustees of the trust, having stopped being a Maori authority, reverts to being a Maori authority.
Treatment The company or the trustees, as applicable, are treated as— (a) disposing of the company’s property, or the trust’s prop- erty, immediately before becoming a Maori authority for a consideration that is the market value of the prop- erty on the date of disposal; and acquiring the property of the Maori authority for a con- sideration that is the market value of the property on the date of disposal referred to in paragraph (a).
(b) Market value for both In subsection (2), the market value of the property is the market value for both the company, or the trustees, as applicable, and the Maori authority.

Depreciation Despite sections EE 55 to EE 60, and EZ 22 (which relate to depreciation), the cost to a Maori authority of property to which this section applies is the lesser of— (a) the market value of the property on the date it was ac- quired; and the original cost of the property to the company or the trust.
(b) Deﬁned in this Act: company, Maori authority, trustee Compare: 2004 No 35 s HI 9 HF 11 Choosing to become Maori authority Notice A person who is eligible under section HF 2 may choose to become a Maori authority by notifying the Commissioner.

Acceptance notiﬁed Having received a notice under subsection (1), the Commis- sioner must notify the person of the acceptance of the election.
(1) (2) 1536 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HG 1 The Commissioner must provide an acceptance date in the no- tice.

(3) (4) When election takes effect The election takes effect on the ﬁrst day of— (a) the income year in which the person’s notice is given; or the next income year, if the person nominates that date in the notice.
(b) When election no longer effective An election under this section stops having effect if the per- son— (a) notiﬁes the Commissioner that the election is cancelled, and the election no longer has effect from the date set out in the notice: stops being a Maori authority.
(b) Deﬁned in this Act: Commissioner, income year, Maori authority, notice, notify Compare: 2004 No 35 s HI 3 Subpart HG—Joint venturers, partners, and partnerships Subpart HG: inserted, on 1 April 2008, by section 19(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

Joint venturers Heading: inserted, on 1 April 2008, by section 19(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
HG 1 Joint venturers (1) (2) When this section applies This section applies when 2 or more people derive income jointly or have deductions jointly, and they are not partners in the same partnership.

Separate shares Each person must calculate their net income for a tax year tak- ing into account their share of the joint income and deductions.
1537 Part H s HG 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Exclusion This section does not apply to the income derived by and the deductions of an airport operator from activities that are activ- ities undertaken as an airport operator.

Deﬁned in this Act: airport operator, deduction, income, net income, partner, partnership, tax year Section HG 1: (Limited Partnerships) Act 2008 (2008 No 2).
inserted, on 1 April 2008, by section 19(1) of the Taxation Partners and partnerships Heading: inserted, on 1 April 2008, by section 19(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
HG 2 Partnerships are transparent Look-through in accordance with share For the purposes of a partner’s liabilities and obligations under this Act in their capacity of partner of a partnership, unless the context requires otherwise,— (a) the partner is treated as carrying on an activity carried on by the partnership, and having a status, intention, and purpose of the partnership, and the partnership is treated as not carrying on the activity or having the status, in- tention, or purpose: the partner is treated as holding property that a part- nership holds, in proportion to the partner’s partnership share, and the partnership is treated as not holding the property: the partner is treated as being party to an arrangement to which the partnership is a party, in proportion to the partner’s partnership share, and the partnership is treated as not being a party to the arrangement: the partner is treated as doing a thing and being entitled to a thing that the partnership does or is entitled to, in proportion to the partner’s partnership share, and the partnership is treated as not doing the thing or being entitled to the thing.
(b) (c) (d) No streaming Despite subsection (1), for a partner in their capacity of partner of a partnership, the amount of income, tax credit, rebate, gain, (1) (2) 1538 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HG 3 (3) (4) expenditure, or loss that they have from a particular source, or of a particular nature, is calculated by multiplying the total income, tax credit, rebate, gain, expenditure, or loss of the partners of the partnership from the particular source or of the particular nature by the partner’s partnership share in the part- nership’s income.
Expenditure or loss previously incurred A partner of a partnership may be treated as incurring an ex- penditure or loss which the partnership incurs ignoring this section, despite the partner not being a partner at the time the expenditure or loss is incurred.

This subsection does not allow 2 deductions for 1 expenditure or loss.
Excluded amounts Subsection (2) does not apply to the following amounts: (a) expenditure or loss that relates to a person entering a partnership by acquiring partner’s interests disposed of by another partner, to the extent to which sections HG 5 to HG 10 do not apply to the partner’s interests: supplementary dividends, to the extent to which subpart LP (Tax credits for supplementary dividends) applies: CTR additional dividends, to the extent to which sub- part LQ (Tax credits of conduit tax relief companies) applies: imputation credits, to the extent to which section LE 6 (Partners in partnerships) applies: FDP credits, to the extent to which section LF 4 (Part- ners in partnerships) applies.
(b) (c) (d) (e) Deﬁned in this Act: arrangement, CTR additional dividend, FDP credit, imput- ation credit, income, partner, partnership, partnership share, rebate supplemen- tary dividend, tax credit Section HG 2: (Limited Partnerships) Act 2008 (2008 No 2).

inserted, on 1 April 2008, by section 19(1) of the Taxation HG 3 General provisions relating to disposals Relationship between disposal upon dissolution and disposal safe harbours Section HG 4 overrides sections HG 5 to HG 10.
(1) 1539 Part H s HG 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Election out of disposal safe harbours for small partnerships Sections HG 5 to HG 9 do not apply for the partners of a small partnership if the entering partner, the exiting partner, and the partnership, furnish returns of income that ignore the sections.
Election in for speciﬁed livestock disposed of to entering partner Section HG 10 applies for an entering partner if the entering partner furnishes a return of income that applies the section.

Section HG 3: (Limited Partnerships) Act 2008 (2008 No 2).

inserted, on 1 April 2008, by section 19(1) of the Taxation Section HG 3(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 269(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HG 3(3) heading: substituted (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 269(2) of the Taxation (International Taxation, Life Insur- ance, and Remedial Matters) Act 2009 (2009 No 34).

Section HG 3(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 269(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HG 4 Disposal upon ﬁnal dissolution (1) (2) When this section applies This section applies when a partnership is ﬁnally dissolved by agreement of the partners, court order, or otherwise, and the partnership’s business ignoring section HG 2 will not continue to be carried on in partnership.
Disposal and re-acquisition A partner of the partnership is treated as disposing of all of their partner’s interests in the partnership, immediately before the dissolution, to a single third party for a payment equal to the interests’ market value.

The partner is treated as re-acquir- ing all of their partner’s interests immediately after the dissol- ution, from the third party for a payment equal to the interests’ market value.
(3) Receipt upon dissolution Anything received by a partner in relation to the ﬁnal dissol- ution of the partnership is ignored.

1540 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HG 5 (4) (5) Exclusion: actual disposal to third party This section does not apply to the extent to which a partner of the partnership disposes of their partner’s interests in the partnership to persons who are not associated with them.
For the purposes of testing association, the partners’ partnership capacity is ignored.
Exclusion: partnerships of persons in marriage, civil union, or de facto relationships This section does not apply if–– (a) (b) (c) (d) immediately before the dissolution, there are only 2 partners of the partnership and they are married to each other, in a civil union together, or in a de facto relation- ship together; and the dissolution is caused by death of a partner, or the dis- solution relates to the settlement of relationship prop- erty; and on dissolution, all partner’s interests of 1 person are transferred, ignoring any intervening transfer to an ex- ecutor or administrator, to the other person; and the transfers of those partner’s interests are subject to provisions in subpart FB or FC (which relate to transfers of relationship property and gifts), and those provisions treat the transfers as disposals for amounts that are not the interests’ market values.
(6) Relationship with subject matter This section overrides sections HG 5 to HG 10.

Deﬁned in this Act: amount, associated person, dispose, partner, partner’s inter- ests, partnership, settlement of relationship property Section HG 4: substituted (with effect on 1 April 2008), on 6 October 2009, by section 270(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HG 4: (Limited Partnerships) Act 2008 (2008 No 2).
inserted, on 1 April 2008, by section 19(1) of the Taxation HG 5 Disposal of partner’s interests (1) When this section applies This section applies when a person (the exiting partner) dis- poses of some or all of their partner’s interests (the current 1541 Part H s HG 5 Income Tax Act 2007 Reprinted as at 1 January 2010 interests) in a partnership, if the amount calculated using the following formula is less than zero: disposal payment + previous payments − (gross tax value − liabilities) − $50,000.
Deﬁnition of items in formula In the formula,— (a) (b) (c) disposal payment is the total amount of consideration paid or payable to the exiting partner for the current interests: previous payments is the total amount of consideration paid or payable to the exiting partner for other dispos- als of some or all of their partner’s interests (the other interests) that have occurred in the year before the dis- posal of the current interests: gross tax value is the total of–– (i) the value under this Act of the current interests and other interests at the time the relevant inter- est is disposed of, to the extent to which the inter- ests are revenue account property or depreciable property, or ﬁnancial arrangments: the market value of the current interests and other interests at the time the relevant interest is dis- posed of, to the extent to which the interests are not revenue account property or depreciable property or ﬁnancial arrangements: (ii) (d) liabilities is the amount of liabilities under generally ac- cepted accounting practice at the time the relevant inter- est is disposed of, calculated by reference to the exiting partner’s partnership share for the relevant interest.
Exiting partner: excluded payment The disposal payment described in subsection (2)(a) is ex- cluded income of the exiting partner.

Exiting partner: no deduction The exiting partner is denied any deduction in relation to the current interests for the income year in which the disposal of the interests occurs and later income years to the extent to which the entering partner is allowed a deduction because of subsection (6).
(2) (3) (4) 1542 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HG 5 (5) (6) (7) (8) Entering partner: no deduction An entering partner is denied any deduction for the disposal payment described in subsection (2)(a).
Entering partner: stepping in For the purposes of calculating the income and deductions of an entering partner for the part of the income year after the disposal of the interests occurs and later income years (the post-disposal periods), the entering partner is treated for the post-disposal periods as if they had originally acquired and held the current interests, not the exiting partner.

However, this subsection does not apply to a deduction carried forward under section HG 12.
Exclusion by election This section does not apply for the partners of a small partner- ship if section HG 3(2) applies.

Relationship with section HG 4 Section HG 4 overrides this section.

Deﬁned in this Act: deduction, depreciable property, dispose, entering part- ner, excluded income, ﬁnancial arrangement, income tax liability, partner, part- ner’s interests, partnership, partnership share, return of income, revenue account property, year Section HG 5: (Limited Partnerships) Act 2008 (2008 No 2).
inserted, on 1 April 2008, by section 19(1) of the Taxation Section HG 5(2)(c): substituted (with effect on 1 April 2008), on 6 October 2009, by section 271(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HG 5(7): amended (with effect on 1 April 2008), on 6 October 2009, by section 271(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HG 5 list of deﬁned terms depreciable property: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 271(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HG 5 list of deﬁned terms ﬁnancial arrangement: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 271(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HG 5 list of deﬁned terms revenue account property: inserted (with effect on 1 April 2008), on 6 October 2009, by section 271(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1543 Part H s HG 6 Income Tax Act 2007 Reprinted as at 1 January 2010 HG 6 Disposal of trading stock When this section applies This section applies when a person (the exiting partner) dis- poses of some or all of their partner’s interests in a partner- ship, to the extent to which those interests include trading stock that is not livestock, and, for the income year of disposal, the total turnover of the partnership, ignoring section HG 2, is $3,000,000 or less.
Exiting partner: excluded payment The amount of consideration paid or payable to the exiting partner for the trading stock is excluded income of the exiting partner.

Exiting partner: no deduction The exiting partner is denied any deduction in relation to the trading stock for the income year in which the disposal of the trading stock occurs and later income years, to the extent to which the entering partner is allowed a deduction because of subsection (5).
Entering partner: no deduction The entering partner is denied any deduction for the amount of consideration paid or payable to the exiting partner for the trading stock.

Entering partner: stepping in For the purposes of calculating the income tax liability of an entering partner, the entering partner is treated as if they had acquired and held the trading stock, not the exiting partner.

Exclusion by election This section does not apply for the partners of a small partner- ship if section HG 3(2) applies.
Relationship with section HG 4 Section HG 4 overrides this section.

Deﬁned in this Act: deduction, dispose, entering partner, excluded income, in- come tax liability, partner, partner’s interests, partnership, small partnership, trading stock, turnover Section HG 6: (Limited Partnerships) Act 2008 (2008 No 2).
inserted, on 1 April 2008, by section 19(1) of the Taxation (1) (2) (3) (4) (5) (6) (7) 1544 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HG 7 Section HG 6(6): amended (with effect on 1 April 2008), on 6 October 2009, by section 272(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HG 7 Disposal of depreciable property (1) (2) (3) (4) (5) When this section applies This section applies when a person (the exiting partner) dis- poses of some or all of their partner’s interests in a partnership, to the extent to which those interests include an item of depre- ciable property that is not depreciable intangible property, and the total cost of the item when it was ﬁrst acquired by the part- ners of the partnership is $200,000 or less.
Exiting partner: excluded payment The amount of consideration paid or payable to the exiting partner for the depreciable property is excluded income of the exiting partner.

Exiting partner: no deduction The exiting partner is denied any deduction in relation to the depreciable property for the income year in which the disposal of the depreciable property occurs and later income years, to the extent to which the entering partner is allowed a deduction because of subsection (5).
Entering partner: no deduction The entering partner is denied any deduction for the amount of consideration paid or payable to the exiting partner for the depreciable property.
Entering partner: stepping in For the purposes of calculating the income tax liability of an entering partner for the part of the income year after the dis- posal of the depreciable property occurs and later income years (the post-disposal periods), the entering partner is treated for the post-disposal periods as if they had originally acquired and held the depreciable property, not the exiting partner.
(6) Exclusion by election This section does not apply for the partners of a small partner- ship if section HG 3(2) applies.

1545 Part H s HG 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (7) Relationship with section HG 4 Section HG 4 overrides this section.
Deﬁned in this Act: deduction, depreciable intangible property, depreciable property, dispose, entering partner, excluded income, income tax liability, part- ner, partner’s interests, partnership, small partnership Section HG 7: (Limited Partnerships) Act 2008 (2008 No 2).
inserted, on 1 April 2008, by section 19(1) of the Taxation Section HG 7(6): amended (with effect on 1 April 2008), on 6 October 2009, by section 273(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HG 8 Disposal of ﬁnancial arrangements and certain excepted ﬁnancial arrangements When this section applies This section applies when a person (the exiting partner) dis- poses of some or all of their partner’s interests in a partner- ship, to the extent to which those interests include a ﬁnancial arrangement or an excepted ﬁnancial arrangement described in section EW 5(10) (What is an excepted ﬁnancial arrange- ment?)
and, ignoring section HG 2— (a) the purpose for which the ﬁnancial arrangement or ex- cepted ﬁnancial arrangement was entered into was ne- cessary and incidental to the business of the partnership; and the partnership does not derive income from a business of holding ﬁnancial arrangements.

(b) Exiting partner: excluded payment The amount of consideration paid or payable to the exiting partner for the relevant ﬁnancial arrangement or excepted ﬁ- nancial arrangement is excluded income of the exiting partner.
The exiting partner is, for the relevant ﬁnancial arrangement, a party that is not required to calculate a base price adjustment, despite section EW 29 (When calculation of base price adjust- ment required).
Exiting partner: no deduction The exiting partner is denied any deduction in relation to the relevant ﬁnancial arrangement or excepted ﬁnancial arrange- ment for the income year in which the disposal of the ﬁnan- (1) (2) (3) 1546 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HG 9 (4) (5) (6) (7) cial arrangement or excepted ﬁnancial arrangement occurs and later income years.
Entering partner: no deduction The entering partner is denied any deduction for the amount of consideration paid or payable to the exiting partner for the relevant ﬁnancial arrangement or excepted ﬁnancial arrange- ment.
Entering partner: stepping in For the purposes of calculating the income tax liability of an entering partner for the part of the income year after the dis- posal of the relevant ﬁnancial arrangement or excepted ﬁnan- cial arrangement occurs and later income years (the post-dis- posal periods), the entering partner is treated for the post-dis- posal periods as if they had acquired and held the ﬁnancial ar- rangement or excepted ﬁnancial arrangement, not the exiting partner.
Exclusion by election This section does not apply for the partners of a small partner- ship if section HG 3(2) applies.

Relationship with section HG 4 Section HG 4 overrides this section.

Deﬁned in this Act: deduction, disposal entering partner, excepted ﬁnancial ar- rangement, excluded income, ﬁnancial arrangement, income tax liability, part- ner, partner’s interests, partnership, small partnership Section HG 8: (Limited Partnerships) Act 2008 (2008 No 2).
inserted, on 1 April 2008, by section 19(1) of the Taxation Section HG 8(6): amended (with effect on 1 April 2008), on 6 October 2009, by section 274(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HG 9 Disposal of short-term agreements for sale and purchase (1) When this section applies This section applies when a person (the exiting partner) dis- poses of some or all of their partner’s interests in a partner- ship, to the extent to which those interests include a short-term agreement for sale and purchase.
1547 Part H s HG 9 Income Tax Act 2007 Reprinted as at 1 January 2010 Exiting partner: excluded payment The amount of consideration paid or payable to the exiting partner for the short-term agreement for sale and purchase is excluded income of the exiting partner.

Exiting partner: no deduction The exiting partner is denied any deduction in relation to the short-term agreement for sale and purchase, to the extent to which the entering partner is allowed a deduction because of subsection (5).
Entering partner: no deduction The entering partner is denied any deduction for the amount of consideration paid or payable to the exiting partner for the short-term agreement for sale and purchase.
Entering partner: stepping in For the purposes of calculating the income tax liability of an entering partner for the part of the income year after the dis- posal of the short-term agreement for sale and purchase occurs and later income years (the post-disposal periods), the enter- ing partner is treated for the post-disposal periods as if they had originally acquired and held the short-term agreement for sale and purchase, not the exiting partner.
Exclusion by election This section does not apply for the partners of a small partner- ship if section HG 3(2) applies.

Relationship with section HG 4 Section HG 4 overrides this section.

Deﬁned in this Act: deduction, disposal entering partner, excluded income, in- come tax liability, partner, partner’s interests, partnership, short-term agreement for sale and purchase, small partnership Section HG 9: (Limited Partnerships) Act 2008 (2008 No 2).
inserted, on 1 April 2008, by section 19(1) of the Taxation Section HG 9 heading: amended (with effect on 1 April 2008), on 6 October 2009, by section 275(1)(a) of the Taxation (International Taxation, Life Insur- ance, and Remedial Matters) Act 2009 (2009 No 34).

Section HG 9(1): amended (with effect on 1 April 2008), on 6 October 2009, by section 275(1)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HG 9(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 275(1)(c) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

(2) (3) (4) (5) (6) (7) 1548 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HG 10 Section HG 9(3): amended (with effect on 1 April 2008), on 6 October 2009, by section 275(1)(d) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HG 9(4): amended (with effect on 1 April 2008), on 6 October 2009, by section 275(1)(e) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HG 9(5): amended (with effect on 1 April 2008), on 6 October 2009, by section 275(1)(f) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HG 9(6): amended (with effect on 1 April 2008), on 6 October 2009, by section 275(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HG 9 list of deﬁned terms short-term agreement for sale and pur- chase: inserted (with effect on 1 April 2008), on 6 October 2009, by section 275(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HG 9 list of deﬁned terms short-term agreement for the sale and purchase of property or services: repealed (with effect on 1 April 2008), on 6 October 2009, by section 275(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HG 10 Disposal of livestock (1) (2) When this section applies This section applies when a person disposes of some or all of their partner’s interests to an entering partner and section HG 3(3) applies, to the extent to which those interests include speciﬁed livestock and that speciﬁed livestock includes female breeding livestock and, for the income year, the partners use–– the national standard cost scheme for speciﬁed live- (a) stock, described in section EC 22 (National standard cost scheme); or the cost price method for speciﬁed livestock, described in EC 25 (Cost price, replacement price, or market value).
(b) Entering partner’s cost base Section EC 26B (Entering partners’ cost base) may apply to the entering partner 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 (Valuation of livestock).
Deﬁned in this Act: amount, cost price, dispose, income year, national standard cost scheme, partner, partner’s interest, speciﬁed livestock 1549 Part H s HG 11 Income Tax Act 2007 Reprinted as at 1 January 2010 Section HG 10: substituted (with effect on 1 April 2009), on 6 October 2009, by section 276(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HG 10: (Limited Partnerships) Act 2008 (2008 No 2).
inserted, on 1 April 2008, by section 19(1) of the Taxation HG 11 Limitation on deductions by partners in limited partnerships When this section applies This section applies for a limited partnership and an income year when, but for this section, a deduction by virtue of section HG 2 or HG 12 is allowed to— (a) (b) a limited partner of the limited partnership: a general partner of the partnership who— (i) was a limited partner of the limited partnership within 60 days of the last day of the income year; and is or will be a limited partner of the limited part- nership within 60 days after the last day of the income year.
(ii) No deduction The partner is denied the deduction for an income year to the extent to which their limited partnership deduction for the in- come year is greater than the amount (the partner’s basis) calculated using the formula in subsection (3) on the last day of the income year.

Partner’s basis For the purposes of subsection (2), the amount that is the part- ner’s basis is calculated using the following formula: investments − distributions + income − deductions − disallowed amount.
Deﬁnition of items in formula The items in the formula are deﬁned in subsections (5) to (9).
Investments Investments is the total of— (a) the market value of capital contributions made by the partner to the limited partnership at the time the relevant contribution is contributed or agreed to be contributed by them: (1) (2) (3) (4) (5) 1550 (6) (7) (8) Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HG 11 (b) (c) the amount paid by the partner for the assignment of capital contributions to them: the secured amounts.
Distributions Distributions is the total of— (a) the market value of distributions to the partner from the limited partnership: the amount paid to the partner for the assignment of capital contributions by them.
(b) Income Income is the total of— (a) income that the partner has by virtue of section HG 2 in the income year and previous income years, excluding dividends paid by a FIF for which the partner has FIF income to the extent to which those dividends are equal to or less than the partner’s FIF income for the relevant income year: capital gain amounts under section CD 44(7)(a) (Avail- able capital distribution amount) that the partner would have by virtue of section HG 2 in the income year and previous income years, if the partner were treated as a company for the purposes of section CD 44(7)(a), un- less the gain is accounted for under paragraph (a): assessable income that the partner has in previous in- come years from goods and services they contributed to the limited partnership, if the income is not accounted for under subsection (5) or paragraph (a) or (b) of this subsection.
Deductions Deductions is the total of— (a) expenditure or loss in previous income years, to the extent to which the expenditure or loss is incurred by virtue of section HG 2 in the partner deriving income by virtue of section HG 2, excluding any deductions de- nied in those previous years under this section: capital loss amounts under section CD 44(9) that the partner would have by virtue of section HG 2 in the income year and previous income years, if the partner (b) (c) (b) 1551 Part H s HG 11 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) is treated as a company for the purposes of section CD 44(9), unless the loss is accounted for under paragraph (a): deductions that the partner is allowed in previous in- come year in relation to assessable income described in subsection (7)(c), if the deduction is not accounted for under subsection (6) or paragraphs (a) or (b) of this sec- tion.
(9) Disallowed amounts Disallowed amount is the amount of investments, as deﬁned in subsection (5), made by the partner within 60 days of the last day of the income year, if those investments are or will be distributed or reduced within 60 days after the last day of the income year.
Exclusion (10) This section does not deny a partner (the exiting partner) a deduction that is equal to or less than the amount of net income that the exiting partner has for the amount paid or payable to the exiting partner for the disposal of their partner’s interests, ignoring other transactions.

Relationship with subject matter (11) This section is modiﬁed by sections HZ 3 and HZ 4 (which relate to transitions to limited partnerships).
Some deﬁnitions In this section,— capital contribution includes a capital contribution for the purposes of the Limited Partnerships Act 2008 limited partnership deduction means, for the partner and the income year, the amount of any deductions that the partner would be allowed if the partner is treated as having no income or deductions other than those that arise by virtue of sections HG 2 and HG 12 partner’s associate means, for a partner, a person who is not a partner of the relevant limited partnership, and who is— (a) (b) a relative of the partner: a company in the same wholly-owned group as the part- ner (12) 1552 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HG 12 (c) (b) secured amounts means, for the partner, the lesser of— (a) the amount of the limited partnership’s debt ignoring section HG 2 (the debt) that the partner or the partner’s associate secures by a guarantee or indemnity: the amount that results from dividing the amount de- scribed in paragraph (a) by the number of partners who are jointly and severally liable for the debt: the amount that is the market value of property against which the guarantee or indemnity may be enforced, treating the partner’s interests as having a market value of zero: the proportion of the amount described in paragraph (c) that is attributable to the partner in the case of the part- ners being jointly and severally liable for the debt.
Deﬁned in this Act: amount, capital contribution, deduction, dividends, enter- ing partner, FIF, FIF income, income, income year, limited partnership deduc- tion, net income, net loss, partner, partner’s associate, partnership (d) Section HG 11: (Limited Partnerships) Act 2008 (2008 No 2).
inserted, on 1 April 2008, by section 19(1) of the Taxation Section HG 11(8)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 277 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

HG 12 Limitation on deductions by partners in limited partnerships: carry-forward (1) (2) (3) When this section applies This section applies when, for an income year, a partner is denied a deduction under section HG 11.
Carry-forward The partner is allowed a deduction, for an amount for which the partner is denied a deduction under section HG 11, for the income year after the one for which it is denied under section HG 11.

Relationship with subject matter The deduction allowed under this section is subject to section HG 11, to the extent to which that section applies to the de- duction and the relevant partner.
Deﬁned in this Act: amount, deduction, income year, limited partner Section HG 12: (Limited Partnerships) Act 2008 (2008 No 2).
inserted, on 1 April 2008, by section 19(1) of the Taxation 1553 Part H s HL 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Subpart HL—Portfolio investment entities Introductory provisions HL 1 Intended effect on portfolio tax rate entities and investors What this section does This section describes the intended effects of this subpart and related provisions of the Act on a portfolio investment entity that is a portfolio tax rate entity and on an investor in a port- folio tax rate entity.
Intended effect on portfolio tax rate entity The intended effects for a person (the entity) who is using funds supplied by investors to make investments of speciﬁed types and who satisﬁes the other requirements for being a port- folio tax rate entity are that the entity— (a) has a tax liability, on proceeds of the investments that are allocated to investors who are natural persons,— (i) calculated using a portfolio investor rate for each investor; and resembling the total tax liability that the group of investors would have if the investors were to make the investments separately; and (ii) (b) (c) has no tax liability on proceeds of the investments that are allocated to other investors; and distributes to each investor amounts resembling the amounts that the investor would receive, after allowing for the tax paid by the entity, if making the investments separately.
Intended effect on investor in portfolio tax rate entity The intended effects for an investor in the entity are that the investor— (a) has no tax liability on income arising from proceeds for which the entity has a tax liability based on a portfolio investor rate of more than zero, unless the investor has given to the entity a portfolio investor rate that is lower than the correct rate; and is liable for tax on any assessable income arising from proceeds for which the entity has a tax liability based on a portfolio investor rate of zero; and (b) (1) (2) (3) 1554 Reprinted as at 1 January 2010 (c) Income Tax Act 2007 Part H s HL 2 receives on the investment in the entity an economic return resembling the return that the investor would re- ceive after payment of tax liabilities if personally mak- ing investments similar to those made by the entity in which the investor has an interest.
Deﬁned in this Act: assessable income, investor, portfolio investment entity, portfolio investor rate, portfolio tax rate entity, tax Compare: 2004 No 35 s HL 1 HL 2 Scheme of subpart (1) (2) Eligibility to be portfolio investment entity The eligibility of an entity to be a portfolio investment entity is determined by sections HL 3 to HL 10.
Election to be type of portfolio investment entity An entity may choose under section HL 11 to be a portfolio investment entity and— (a) portfolio tax rate entity if the entity is— (i) a company, superannuation fund, or group in- vestment fund; and eligible under section HL 3(1) to make an elec- tion; or (ii) (b) (c) (d) portfolio listed company if the entity is— (i) a company listed on a recognised exchange in New Zealand or an unlisted company choosing to become a portfolio listed company under section HL 12; and eligible under section HL 3(3) to make an elec- tion; or (ii) portfolio deﬁned beneﬁt fund if the entity is— (i) (ii) a deﬁned beneﬁt fund; and eligible under section HL 3(5) to make an elec- tion; or portfolio investment-linked life fund if the entity is— (i) a separate identiﬁable fund, forming part of a life insurer, holding investments subject to life insur- ance policies under which beneﬁts are directly linked to the value of the investments held in the fund; and 1555 Part H s HL 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) eligible under section HL 3(7) to make an elec- tion.
Portfolio listed company choosing to be portfolio tax rate entity (2B) An entity that chooses to become a portfolio listed company as described in subsection (2)(b) may choose to become a port- folio tax rate entity as described in subsection (2)(a).

Becoming a portfolio investment entity The time at which an entity becomes a portfolio investment entity and the effects of the change are given by sections HL 13 and HL 14.
Ceasing to be a portfolio investment entity The time at which an entity ceases to be a portfolio investment entity and the effects of the change are given by section HL 15.
Portfolio allocation period and portfolio calculation period An entity who is a portfolio tax rate entity has under section HL 16— (a) a portfolio allocation period, which gives the length of the periods in the tax year to which the entity’s income and outgoings are allocated; and a portfolio calculation period, which gives the length of the periods in the tax year between each calculation by the entity of the amounts of income and outgoings allocated to each portfolio allocation period.
(b) Treatment of entity’s income from property with no investor or with interest not vested The treatment of income from an entity’s property in which no investor has an interest, or in which the interest has not vested in an investor, is given by section HL 17.
Portfolio entity tax liability An entity who is a portfolio tax rate entity in a portfolio allo- cation period must pay income tax of an amount found from the following amounts (a) the portfolio class net income or portfolio class net loss calculated under section HL 19— (i) for each portfolio investor class and each port- folio allocation period: (3) (4) (5) (6) (7) 1556 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 2 (b) (c) (d) (e) (f) (ii) from the entity’s assessable income and deduc- tions allocated to the class and the period: the portfolio class taxable income or portfolio class tax- able loss calculated under section HL 20— (i) for each portfolio investor class and each port- folio allocation period: from the portfolio class net income or portfolio class net loss for the class and the period and, if appropriate, any portfolio entity formation loss under section HL 30, and any portfolio class tax- able loss under section HL 31 that is portfolio class land loss under section HL 32: (ii) the portfolio entity tax liability calculated under section HL 21— (i) for each portfolio investor class of the entity and each portfolio allocation period in the tax year: from the portfolio class taxable income for the period, the portfolio investor interest fraction and portfolio investor rate for each investor in the class for the period: (ii) the amount of fees paid to the entity by the investor on the day: the amount of rebates of fees credited to the investor by the entity on the day: the amount of expenditure, for the income year ending with the day, transferred under subpart DV (Expend- iture speciﬁc to certain entities) to the entity by the in- vestor.
(8) (9) Payments of tax by portfolio tax rate entity A portfolio tax rate entity is liable to pay tax equal to the amount of the entity’s portfolio entity tax liability for a tax year by the payments required by sections HL 22 to HL 24, depending on the entity’s portfolio allocation period and port- folio calculation period.
Portfolio investor allocated income and portfolio investor allocated loss An investor in a portfolio tax rate entity in a tax year is treated as— 1557 Part H s HL 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) deriving income for the tax year equal to the amount by which the investor’s total portfolio investor allocated income under section HL 26 for the tax year exceeds the investor’s total portfolio investor allocated loss under section HL 26 for the tax year: having, if the investor is a zero-rated portfolio investor, for the tax year a deduction under section HL 27 equal to the amount by which the investor’s total portfolio in- vestor allocated loss under section HL 26 for the tax year exceeds the investor’s total portfolio investor allo- cated income under section HL 26 for the tax year.
Tax credit for some portfolio investor allocated loss If a portfolio tax rate entity does not make an election under section HL 23, the entity has a tax credit under section HL 28 if it has an investor in a portfolio investor class who is not a zero-rated portfolio investor and who has total portfolio investor allocated loss for a period exceeding the investor’s total portfolio investor allocated income for the period.
Treatment of tax credits If a portfolio tax rate entity does not make an election under section HL 23, the tax liability of the entity relating to an in- vestor in the entity for a portfolio allocation period is reduced in the way given by HL 29 for credits that are received by the entity and allocated to the investor for the portfolio allocation period.
(10) (11) Portfolio investor proxies (12) An entity who meets the requirements of section HL 33— (a) may be a portfolio investor proxy; and (b) must perform the obligations imposed by the section relating to a portfolio investor interest held by the entity for an investor.
Deﬁned in this Act: amount, deduction, income, income tax, income year, in- vestor, portfolio allocation period, portfolio calculation period, portfolio class net income, portfolio class net loss, portfolio class taxable income, portfolio investment entity, portfolio investor allocated income, portfolio investor allo- cated loss, portfolio investor class, portfolio investor interest, portfolio investor interest fraction, portfolio investor proxy, portfolio investor rate, portfolio tax rate entity, tax, tax credit, tax year, zero-rated portfolio investor Compare: 2004 No 35 s HL 2 1558 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 3 Section HL 2(2) heading: substituted, on 1 April 2008, by section 410(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 2(2): substituted, on 1 April 2008, by section 410(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 2(2)(b)(i): substituted (with effect on 1 April 2009), on 6 October 2009, by section 278(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 2(2B) heading: inserted (with effect on 1 April 2009), on 6 October 2009, by section 278(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 2(2B): inserted (with effect on 1 April 2009), on 6 October 2009, by section 278(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 2(7)(c)(ii): amended, on 1 April 2008, by section 410(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 2(7)(d): added, on 1 April 2008, by section 410(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 2(7)(e): added, on 1 April 2008, by section 410(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 2(7)(f): added, on 1 April 2008, by section 410(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Eligibility requirements: portfolio investment entities and foreign investment vehicles HL 3 Eligibility requirements for entities (1) (2) (3) Eligibility requirements for entity electing to be portfolio tax rate entity An entity that is choosing under section HL 11 to be a portfolio investment entity and portfolio tax rate entity must meet the eligibility requirements described in subsections (9), (10), and (11).
Eligibility requirements for portfolio tax rate entity A portfolio tax rate entity must meet— (a) the eligibility requirements described in subsections (9), (10), and (11); and the further eligibility requirements described in sections HL 5C, HL 6, HL 7, HL 9, and HL 10.
(b) Eligibility requirements for entity electing to be portfolio listed company An entity that is choosing under section HL 11 to be a portfolio investment entity and portfolio listed company must meet the 1559 Part H s HL 3 Income Tax Act 2007 Reprinted as at 1 January 2010 eligibility requirements described in subsections (9), (10), and (11).
Eligibility requirements for portfolio listed company A portfolio listed company must meet— (a) the eligibility requirements described in subsections (9), (10), and (11); and the further eligibility requirements described in sections HL 5C, HL 6, HL 8, HL 9, and HL 10.
(b) Eligibility requirements for entity electing to be portfolio deﬁned beneﬁt fund An entity that is choosing under section HL 11 to be a portfolio investment entity and portfolio deﬁned beneﬁt fund must meet the eligibility requirements described in subsections (9), (10), and (11).
Eligibility requirements for portfolio deﬁned beneﬁt fund A portfolio deﬁned beneﬁt fund must meet— (a) the eligibility requirements described in subsections (9), (10), and (11); and the further eligibility requirements described in sections HL 5C, HL 6, HL 9, and HL 10.
(b) Eligibility requirements for separate identiﬁable fund electing to be portfolio investment-linked life fund An entity that is choosing under section HL 11 to be a port- folio investment entity and portfolio investment-linked life fund must meet the eligibility requirements described in sub- sections (10) and (11).
Eligibility requirements for portfolio investment-linked life fund A portfolio investment-linked life fund must meet— (a) the eligibility requirements described in subsections (10) and (11); and the further eligibility requirements described in sections HL 6, HL 9, and HL 10.

(b) Business requirement The business requirement is that the entity must not carry on a business of life insurance.

This requirement does not apply to a portfolio investment-linked life fund.
(4) (5) (6) (7) (8) (9) 1560 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 4 Residence requirement (10) The residence requirement is that the entity must be— (a) (b) resident in New Zealand; and not treated under a double tax agreement as not being resident in New Zealand.
Entity history requirement (11) The entity history requirement is that the entity must not, be- fore the day on which the election to be a portfolio investment entity is to be effective, have ceased to be a portfolio invest- ment entity under section HL 15(1), unless the cessation oc- curred more than 5 years before the day on which the election is effective.
Deﬁned in this Act: company, double tax agreement, group investment fund, life insurance, portfolio deﬁned beneﬁt fund, portfolio investment entity, port- folio investment-linked life fund portfolio listed company, portfolio tax rate entity, resident in New Zealand, superannuation fund Compare: 2004 No 35 s HL 3 Section HL 3: substituted, on 1 April 2008, by section 411 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 3(9): substituted (with effect on 1 April 2009), on 6 October 2009, by section 279(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 3(11): amended (with effect on 1 April 2009), on 6 October 2009, by section 279(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HL 4 Effect of failure to meet eligibility requirements for entities (1) (2) Failure to meet certain requirements An entity ceases under this section to be eligible to be a port- folio investment entity if the entity fails at any time to meet a requirement that is— (a) (b) referred to in sections HL 2(2) and HL 3; and not referred to in subsection (2)(a).
Failure to meet other requirements An entity ceases under this section to be eligible to be a port- folio investment entity if— (a) the portfolio investor class of the entity fails to meet a requirement under section HL 6 or HL 9 on the last day of a quarter— 1561 Part H s HL 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (i) (ii) beginning 6 months or more after the date on which the portfolio investor class is formed; and ending more than 3 months before an announce- ment by the entity to its investors that the portfolio investor class is winding up within 12 months of the announcement; and (ab) (b) the entity fails to meet a requirement under section HL 10 on the last day of a quarter— (i) beginning 6 months or more after the date on which the entity becomes a portfolio investment entity; and ending more than 3 months before an announce- ment by the entity to its investors that the entity is winding up within 12 months of the announce- ment; and the entity’s failure— (i) (ii) (ii) is signiﬁcant and would not have occurred but for an event or circumstance within the control of the entity: is repeated on the last day of the quarter follow- ing the quarter referred to in paragraph (a) and ending more than 3 months before the announce- ment referred to in paragraphs (a)(ii) and (ab)(ii).
Deﬁned in this Act: investor, portfolio deﬁned beneﬁt fund, portfolio invest- ment entity, quarter Compare: 2004 No 35 s HL 4 Section HL 4(1)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 280(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 4(2)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 280(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 4(2)(a): amended, on 1 April 2008, by section 412 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 4(2)(ab): inserted (with effect on 1 April 2008), on 6 October 2009, by section 280(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 4(2)(b)(ii): amended (with effect on 1 April 2008), on 6 October 2009, by section 280(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1562 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 5B HL 5 Foreign investment vehicles (1) (2) When entity becomes foreign investment vehicle An entity becomes a foreign investment vehicle if the entity— (a) (b) is not resident in New Zealand; and is a company, a superannuation scheme, or the trustee of a trust that would be a unit trust if there were more than 1 subscriber, purchaser, or contributor participating as beneﬁciaries under the trust; and has investors that would, if the entity were a portfolio investment entity, be a portfolio investor class meet- ing the investor membership requirements under sec- tion HL 6(1)(a) to (i); and has investors who, if they are resident in New Zealand, would meet the investor interest size requirements under section HL 9 if the entity were a portfolio invest- ment entity; and (c) (d) (e) meets the further eligibility requirements relating to in- vestments under section HL 10.
(b) When entity ceases to be foreign investment vehicle An entity that becomes a foreign investment vehicle ceases under this section to be a foreign investment vehicle if the entity— (a) fails to meet a requirement under subsection (1)(a) and (b): fails to meet a requirement under subsection (1)(c), (d), and (e)— (i) (ii) on the last day of a quarter; and on the last day of the quarter following the quar- ter referred to in subparagraph (i).
Deﬁned in this Act: company, foreign investment vehicle, investor, portfolio investment entity, portfolio investor class, quarter, resident in New Zealand, superannuation scheme, trustee, unit trust Compare: 2004 No 35 s HL 5 HL 5B Meaning of investor and portfolio investor class (1) Meaning of investor An investor, in relation to a portfolio investment entity or for- eign investment vehicle (the entity), means,— (a) if the entity is a company, a shareholder in the company: 1563 Part H s HL 5B Income Tax Act 2007 Reprinted as at 1 January 2010 (b) if the entity is not a company and paragraph (c) does not apply, a person who is entitled to a proportion of the funds available for distribution by the entity— (i) by reason of the rules of the entity or the terms of the trust under which the entity is established; and as if the entity were a company and the person were a shareholder in the company: (ii) (c) (d) if the entity is a portfolio investment-linked life fund, a person whose beneﬁts under the relevant life insurance policy are directly linked to the value of investments held in the portfolio investment-linked life fund: [Repealed] Meaning of portfolio investor class A portfolio investor class for a portfolio investment entity means a group of 1 or more investors in the entity with each investor having an entitlement to a distribution by the entity of proceeds from portfolio entity investments such that— (a) the portfolio entity investments are the same for all the investors in the group; and each investor’s interest in a portfolio entity investment represents a proportion (the investment proportion) of the value of the investor’s entitlement; and the investment proportion for each investor and each portfolio entity investment differs from the average value of the investment proportion, for the investors in the group and the portfolio entity investment, by less than 2.5% of that average value except if subsection (3) applies.
(b) (c) Exception to requirement of subsection (2)(c) The investment proportion for an investor in a group referred to in subsection (2) and a portfolio entity investment may differ by 2.5% or more from the average value for the group and the investment if— (a) the portfolio entity investment is an arrangement under which the entity is assured of receiving, from invest- ments, sufﬁcient proceeds for the entity to repay each investor in the group an amount contributed to the en- tity; and (2) (3) 1564 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 5C (b) the excess in difference between the investment propor- tion for the investor and the average value for the group arises from differences between the portfolio investor rates of members of the group.
Deﬁned in this Act: investor, portfolio entity investment, portfolio investment entity, portfolio investor class, portfolio investor interest Compare: 2004 No 35 s HL 5B Section HL 5B: inserted, on 1 April 2008, by section 413 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 5B(1)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 281(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 5B(1)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 281(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 5B(1)(c): amended (with effect on 1 April 2008), on 6 October 2009, by section 281(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 5B(1)(d): repealed (with effect on 1 April 2008), on 6 October 2009, by section 281(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

HL 5C Income interest requirement (1) (2) What this section applies to This section applies to a portfolio investment entity that is not a portfolio investment-linked life fund.
Requirement The income interest requirement is that all portfolio investor interests in the entity that give rights in relation to proceeds from a portfolio entity investment give the rights in relation to all the proceeds from the investment that are not category B income.
Deﬁned in this Act: category B income, portfolio entity investment, portfolio investment entity, portfolio investment-linked life fund portfolio investor inter- est Compare: 2004 No 35 s HL 5C Section HL 5C: inserted, on 1 April 2008, by section 413 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
1565 Part H s HL 6 Income Tax Act 2007 Reprinted as at 1 January 2010 HL 6 Investor membership requirement General investor membership requirement (1A) The investor membership requirement for an entity that is not a company listed on a recognised exchange in New Zealand and does not meet the requirements of subsection (3) is that each portfolio investor class of the entity must meet the re- quirements of subsection (1).
(b) (c) (d) Investor membership requirement for portfolio investor class The investor membership requirement for a portfolio investor class is that the class must include— (a) 20 persons, treating all interests held by associated per- sons and included by subsection (4) as being held by 1 person: a portfolio investment entity: a foreign investment vehicle: an entity that— (i) meets the requirements in section HL 3 that would be relevant if the entity were choosing to be a portfolio investment entity; and has not chosen to be a portfolio investment entity: (e) (f) (g) (h) (ii) a life insurer: the New Zealand Superannuation Fund: the Accident Compensation Corporation: a Crown entity subsidiary of the Accident Compensa- tion Corporation: the Earthquake Commission: (i) (ib) Auckland Regional Holdings: (ic) (j) a community trust: less than 20 persons, as determined under paragraph (a), if— (i) (ii) (iii) the entity has 1 or more other portfolio investor classes that satisfy paragraph (a); and no investor in the class, other than the entity’s manager or trustee, can control the investment decisions relating to that class; and investors for which the entity would not meet the investor membership requirement in the absence of this paragraph have portfolio investor interests (1) 1566 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 6 with a total value of less than 10% of the total value of portfolio investor interests in the entity.
(k) [Repealed] (2) Investor membership requirement for listed company The investor membership requirement for an entity that is a company listed on a recognised exchange in New Zealand is that— (a) the company must not have more than 1 portfolio in- vestor class of investors holding portfolio investor inter- ests in the company; and each investor must be a member of the portfolio investor class; and each portfolio investor interest in the company must be a share traded on the recognised exchange.
(b) (c) (3) No investor membership requirement for public unit trusts There is no investor membership requirement for a portfolio investor class that, if treated as a unit trust, would meet the requirements of 1 or more of paragraphs (a) and (c) to (e) of the deﬁnition of public unit trust.
No investor membership requirement for certain superannuation funds and others (3B) There is no investor membership requirement for a portfolio investor class that is, or includes an investor that is— (a) (b) (c) a superannuation fund established under the proposal for the restructuring of the National Provident Fund re- quired by the National Provident Fund Restructuring Act 1990: the fund established by the Government Superannu- ation Fund Act 1956: a superannuation fund that— (i) (ii) existed before 17 May 2006; and on or after 17 May 2006, if treated as a unit trust, would have met the requirements of 1 or more of paragraphs (a) and (c) to (e) of the deﬁnition of public unit trust; and has no investor, other than the fund’s manager or trustee, that can control the investment decisions relating to that class: (iii) 1567 Part H s HL 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (d) a public unit trust.
Interests of some associated investors included with interests of investor for some purposes For the purposes of subsection (1), the portfolio investor inter- ests of persons associated with an investor in a portfolio in- vestor class are included with the portfolio investor interests of the investor if— (a) (b) the investor is not listed in subsection (1)(b) to (ib); and the associated person is not listed in subsection (1)(b) to (ib); and the investor has a portfolio investor interest fraction of 5% or more; and the associated person has a portfolio investor interest fraction of 5% or more.
(c) (d) Deﬁned in this Act: 1988 version provisions, associated person, company, for- eign investment vehicle, group investment fund, investor, New Zealand, port- folio entity investment, portfolio investment entity, portfolio investor class, portfolio investor interest, portfolio investor proxy, public unit trust, recognised exchange, registered superannuation scheme, share, unit trust Compare: 2004 No 35 s HL 6 Section HL 6(1A) heading: inserted, on 1 April 2008, by section 414(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 6(1A): inserted, on 1 April 2008, by section 414(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 6(1) heading: substituted, on 1 April 2008, by section 414(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 6(1): amended, on 1 April 2008, by section 414(2)(a) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 6(1)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 282(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 6(1)(ib): inserted (with effect on 1 April 2009), on 6 October 2009, by section 282(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 6(1)(ic): inserted (with effect on 1 April 2009), on 6 October 2009, by section 282(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 6(1)(j)(iii): amended (with effect on 1 April 2008), on 6 October 2009, by section 282(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 6(1)(j)(iii): amended, on 1 April 2008, by section 414(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

(4) 1568 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 7 Section HL 6(1)(k): repealed (with effect on 1 April 2008), on 6 October 2009, by section 282(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 6(1)(k): added, on 1 April 2008, by section 414(2)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 6(3) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 282(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 6(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 282(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 6(3): amended, on 1 April 2008, by section 414(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 6(3)(d): added, on 1 April 2008, by section 414(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 6(3B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 282(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 6(3B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 282(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 6(4)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 282(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 6(4)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 282(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 6(4)(c): substituted, on 1 April 2008, by section 414(5) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 6(4)(d): added, on 1 April 2008, by section 414(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

HL 7 Investor return adjustment requirement: portfolio tax rate entity (1) (2) When this section applies This section applies to a portfolio tax rate entity.
Investor return adjustment requirement The investor return adjustment requirement is that the entity must make an adjustment referred to in subsection (3) to re- ﬂect the effect of the portfolio investor rate of an investor, as a member of a portfolio investor class on— (a) the amount of the entity’s portfolio entity tax liability for the portfolio investor class; and 1569 Part H s HL 7 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the amount of a tax credit under section HL 28 or HL 29 allocated to the investor as a member of the portfolio investor class.
Nature of adjustment An adjustment reﬂecting the effect of the investor’s portfolio investor rate must be made to— (a) the investor’s portfolio investor interest in the portfolio investor class or another portfolio investor class— (i) before the end of the second month after the port- folio calculation period, if the entity has made an election under section HL 22; or before the end of the third month after the end of the income year, if the entity has made an election under section HL 23; or before the end of the second month after the end of the tax year, if the entity has made an election under section HL 24: (ii) (iii) (b) (c) the amount of each distribution to the investor as a member of the portfolio investor class or another port- folio investor class: the amount of each payment required from the investor as a member of the portfolio investor class towards sat- isfying the entity’s portfolio entity tax liability.
Investor may be offered choice of method A portfolio tax rate entity may offer an investor a choice of the method of adjustment.

Extending time limits On application by a portfolio tax rate entity, the Commissioner may extend a time limit imposed under subsection (3)(a) if it is reasonable in the circumstances.
Deﬁned in this Act: company, investor, portfolio calculation period, portfolio entity tax liability, portfolio investor class, portfolio investor interest, portfolio investor rate, portfolio tax rate entity, recognised exchange, tax credit, tax year, unit trust Compare: 2004 No 35 s HL 7 Section HL 7(3): substituted, on 1 April 2008, by section 415 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 7(5) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 283 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

(3) (4) (5) 1570 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 9 Section HL 7(5): added (with effect on 1 April 2008), on 6 October 2009, by section 283 of the Taxation (International Taxation, Life Insurance, and Remed- ial Matters) Act 2009 (2009 No 34).
HL 8 Imputation credit distribution requirement: portfolio listed company (1) (2) What this section applies to This section applies to a portfolio investment entity that— is an imputation credit account company; and (a) is not a portfolio investment-linked life fund.
(b) Imputation credit requirement The imputation credit distribution requirement is that when the entity makes a distribution to the members of a portfolio in- vestor class, the distribution must be fully credited for the pur- poses of section CD 43 (Available subscribed capital (ASC) amount) to the extent permitted by the imputation credits that the directors of the entity determine are available.
Deﬁned in this Act: director, imputation credit, portfolio investment entity, portfolio investment-linked life fund portfolio investor class, portfolio listed company Compare: 2004 No 35 s HL 8 Section HL 8(1) heading: substituted, on 1 April 2008, by section 416(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 8(1): substituted, on 1 April 2008, by section 416(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 8 list of deﬁned terms portfolio investment-linked life fund: in- serted, on 1 April 2008, by section 416(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

HL 9 Investor interest size requirement (1) (2) Investor interest size requirement The investor interest size requirement for a portfolio invest- ment entity is that an investor in a portfolio investor class may not hold more than 20% of the total portfolio investor interests of investors in the class.
No investor interest size requirement for public unit trusts There is no investor membership requirement for a portfolio investor class that, if treated as a unit trust, would meet the requirements of 1 or more of paragraphs (a) and (c) to (e) of the deﬁnition of public unit trust.
1571 Part H s HL 9 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) Exception for certain investors An entity with an investor holding more than 20% of the total portfolio investor interests in a class does not breach the in- vestor interest size requirement if— (a) the entity is not a portfolio listed company and the in- vestor is listed in subsection (4): the entity is a portfolio listed company and the investor is listed in subsection (4) and holds less than 40% of the total portfolio investor interests in the class.
(b) Investors to which exception applies An investor may hold a portfolio investor interest in a portfolio investor class that would otherwise breach the investor interest size requirement for the entity if the investor or the class is— (a) (b) (c) a portfolio investment entity: a foreign investment vehicle: an entity that— (i) (d) (e) (f) (g) (h) (ii) meets the requirements of section HL 3 that would be relevant if the entity were choosing to become a portfolio investment entity; and has not chosen to become a portfolio investment entity: a life insurer: the New Zealand Superannuation Fund: a superannuation fund established under the proposal for the restructuring of the National Provident Fund re- quired by the National Provident Fund Restructuring Act 1990: the fund established by the Government Superannu- ation Fund Act 1956: a superannuation fund that— (i) (ii) existed before 17 May 2006; and on or after 17 May 2006, if treated as a unit trust, would have met the requirements of 1 or more of paragraphs (a) and (c) to (e) of the deﬁnition of public unit trust; and has no investor, other than the fund’s manager or trustee, that can control the investment decisions relating to that class: (iii) (i) a public unit trust: 1572 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 9 (j) (k) the Accident Compensation Corporation: a Crown entity subsidiary of the Accident Compensa- tion Corporation: (l) the Earthquake Commission: (m) Auckland Regional Holdings: (n) a portfolio investor class of less than
 20 persons, treat- ing all interests held by associated persons and included by subsection (6) as being held by 1 person, if— (i) (ii) (iii) the entity has 1 or more other portfolio investor classes that meet the requirements of section HL 6(1)(a); and no investor in the class, other than the entity’s manager or trustee, can control the investment decisions relating to that class; and investors for which the entity would not meet the investor membership requirement in the absence of this paragraph have portfolio investor interests with a total value of less than 10% of the total value of portfolio investor interests in the entity: (5) (6) (o) (p) a community trust: a person who meets the requirements of subsection (5).
Exception for shares in portfolio listed company held from 17 May 2006 An investor who is not listed in subsection (4)(a) to (o) may on a date after 30 September 2007 hold portfolio investor interests in a portfolio listed company that are more than 20% and not more than 40% of the total interests of investors in a portfolio investor class if the investor holds portfolio interests that are more than 20% and not more than 40% of the total interests of investors on each day in the period beginning on 17 May 2006 and ending before the date.
Interests of some associated investors included with interests of investor for some purposes For the purposes of subsections (1) and (5), the portfolio in- vestor interests of persons associated with an investor in a portfolio investor class are included with the portfolio investor interests of the investor if— (a) the investor is not listed in subsection (4)(a) to (o); and 1573 Part H s HL 9 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) (d) the associated person is not listed in subsection (4)(a) to (o); and the investor has a portfolio investor interest fraction of 5% or more; and the associated person has a portfolio investor interest fraction of 5% or more.
Deﬁned in this Act: associated person, company, deﬁned beneﬁt fund, foreign investment vehicle, group investment fund, investor, life insurer, New Zealand resident, portfolio investment entity, portfolio investor class, portfolio investor interest, portfolio investor interest fraction, public unit trust, recognised ex- change, superannuation fund, unit trust Compare: 2004 No 35 s HL 9 Section HL 9(2) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 284(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 9(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 284(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 9(2): amended, on 1 April 2008, by section 417(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 9(2)(c): amended, on 1 April 2008, by section 417(2) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 9(2)(d): added, on 1 April 2008, by section 417(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 9(4): substituted (with effect on 1 April 2008), on 6 October 2009, by section 284(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 9(4)(i): amended, on 1 April 2008, by section 417(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 9(4)(j): added, on 1 April 2008, by section 417(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 9(4)(o): substituted (with effect on 1 April 2009), on 6 October 2009, by section 284(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 9(4)(p): added (with effect on 1 April 2009), on 6 October 2009, by section 284(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 9(5): amended (with effect on 1 April 2009), on 6 October 2009, by section 284(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 9(5): amended (with effect on 1 April 2008), on 6 October 2009, by section 284(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

1574 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 10 Section HL 9(6)(a): substituted (with effect on 1 April 2009), on 6 October 2009, by section 284(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 9(6)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 284(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 9(6)(b): substituted (with effect on 1 April 2009), on 6 October 2009, by section 284(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 9(6)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 284(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 9(6)(c): substituted, on 1 April 2008, by section 417(4) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 9(6)(d): added, on 1 April 2008, by section 417(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 10 Further eligibility requirements relating to investments (1) (2) Investment type requirement The investment type requirement is that 90% or more by value of the entity’s assets must be— an interest in land: (a) a ﬁnancial arrangement: (b) an excepted ﬁnancial arrangement: (c) a right or option concerning property referred to in para- (d) graphs (a) to (c).
(b) Income type requirement The income type requirement is that the income derived by the entity must, to the extent of 90% or more,— (a) be derived from property referred to in subsection (1); and consist of the following: dividends: (i) replacement payments: (ib) income treated under subpart EW (Financial ar- (ii) rangements rules) as being derived by the entity: an amount of income from a lease of land, but this subparagraph does not apply if the lessee under the lease is associated with the entity deriving the amount: (iii) 1575 Part H s HL 10 Income Tax Act 2007 Reprinted as at 1 January 2010 (iv) proceeds from the disposal of property referred to in subsection (1)(a) to (d): foreign investment fund (FIF) income: (v) (vi) portfolio investor allocated income: (vii) distributions from superannuation funds.
(3) (4) Entity shareholding investment requirement The entity shareholding investment requirement is that, for an investment of the entity consisting of shares in a company that is not listed in subsection (4),— (a) the investment must— (i) carry voting interests in the company equal to or less than 20%, if the company is not a unit trust; or have a market value equal to or less than 20% of the total market value of all shares in the com- pany, if the company is a unit trust: (ii) (b) the amount that is 10% of the total market value of all the entity’s investments must be greater than the total market value of all the entity’s investments in— (i) shares in a company that is not a unit trust that carry voting interests of more than 20% in the company: shares in a company that is a unit trust that have a market value of more than 20% of the total market value of all shares in the company.
(ii) Investments not affected by shareholding investment requirement The requirements of subsection (3)(a) and (b) do not apply to an investment consisting of shares in— (a) (b) (c) a portfolio investment entity: a foreign investment vehicle: an entity that— (i) meets the requirements in section HL 3 that would be relevant if the entity were choosing to be a portfolio investment entity; and has not chosen to be a portfolio investment entity: (ii) a portfolio land company.
(d) 1576 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 10 (5) Class shareholding investment requirement The class shareholding investment requirement is that, for each portfolio investor class and each investment referred to in subsection (3),— (a) the portfolio class fraction of the investment must— (i) correspond to voting interests in the company equal to or less than 20%, if the company is not a unit trust; or have a market value equal to or less than 20% of the total market value of all shares in the com- pany, if the company is a unit trust: (ii) (b) the amount that is 10% of the total market value of all the class’s interests in the entity’s investments must be greater than the total market value of all the class’s inter- ests in the entity’s investments in— (i) shares in a company that is not a unit trust that carry voting interests of more than 20% in the company: shares in a company that is a unit trust that have a market value of more than 20% of the total market value of all shares in the company.
(ii) Deﬁned in this Act: amount, company, dividend, excepted ﬁnancial arrange- ment, FIF income, ﬁnancial arrangement, foreign investment vehicle, futures contract, income, interest, investor, portfolio class fraction, portfolio class in- vestment value, portfolio entity investment, portfolio investment entity, port- folio investor allocated income, portfolio investor class, portfolio land com- pany, share, superannuation fund, voting interest Compare: 2004 No 35 s HL 10 Section HL 10(1): amended, on 1 April 2008, by section 418(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 10(2)(b)(ib): inserted, on 1 April 2008, by section 418(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 10(2)(b)(iii): substituted (with effect on 1 April 2008), on 6 October 2009, by section 285 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 10(2)(b)(iii): substituted, on 1 April 2008, by section 418(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 10(2)(b)(iv): amended, on 1 April 2008, by section 418(2)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 10(4): amended, on 1 April 2008, by section 418(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1577 Part H s HL 11 Income Tax Act 2007 Reprinted as at 1 January 2010 Becoming and ceasing to be portfolio investment entity HL 11 Election to become portfolio investment entity and cancellation of election (1) (2) Notice of election An entity that meets the eligibility requirements in section HL 3 for an entity may choose to be a portfolio investment entity by giving a notice in the prescribed form to the Commissioner at any time after 1 April 2007.
When election effective An election received by the Commissioner is effective on the latest of the following: 1 October 2007: (a) the date of formation of the entity: (b) the date nominated in the notice: (c) the date 30 days before the day of receipt.
(d) Exception to when election effective: certain elections relating to portfolio investment-linked life funds (2B) Despite subsection (2), an election received by the Commis- sioner is effective on 1 October 2007 if— (a) the election is in relation to an electing entity choosing to be a portfolio investment-linked life fund; and the date of receipt is before 1 April 2008; and 1 October 2007 is nominated in the notice.
(b) (c) Notice of cancellation An entity may choose at any time to cease being a portfolio investment entity by giving a notice in the prescribed form to the Commissioner.
When cancellation effective An election to cease being a portfolio investment entity re- ceived by the Commissioner takes effect from the later of the following: (a) the date on which the entity became a portfolio invest- ment entity: the date nominated in the notice: (b) (3) (4) 1578 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 12 the date of receipt.
(c) Deﬁned in this Act: Commissioner, company, notice, portfolio investment en- tity, portfolio investment-linked life fund quarter, recognised exchange, tax year Compare: 2004 No 35 s HL 11 Section HL 11(2B) heading: inserted, on 1 April 2008, by section 419(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 11(2B): inserted, on 1 April 2008, by section 419(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 11 list of deﬁned terms portfolio investment-linked life fund: in- serted, on 1 April 2008, by section 419(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 12 Unlisted company choosing to become portfolio listed company (1) (2) (3) Election A company that is not listed on a recognised exchange in New Zealand may choose under section HL 11 to become a port- folio investment entity that is a portfolio listed company if it— (a) (b) has at least 100 shareholders; and has resolved to become a company listed on a recog- nised exchange in New Zealand if it were to obtain the required consents; and has applied to the Securities Commission for an exemp- tion to disclose in a prospectus its intention to become a listed company; and satisﬁes the Commissioner that the company would apply to become a listed company if it were to obtain the required consents.
(c) (d) Election effective for 2 years A company that makes an election under subsection (1) stops being a portfolio listed company from the last day of the period of 2 years from the date on which the election takes effect, if the company is not listed on a recognised exchange in New Zealand on that day.
Extension in certain cases Despite subsection (2), a company that makes an election under subsection (1) does not stop being a portfolio listed company from the last day of the period of 2 years from the date on which the election takes effect if— 1579 Part H s HL 13 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) (a) (b) the company has met the requirements of subsection (1)(b) and (c) before 2 July 2009; and a period of 4 years from the date on which the election takes effect has not expired.
Further extension granted by Commissioner Despite subsections (2) and (3), the Commissioner may grant a further extension of time if it is reasonable in the circum- stances.
Deﬁned in this Act: Commissioner, company, portfolio investment entity, port- folio listed company, public unit trust, recognised exchange, shareholder, unit trust Compare: 2004 No 35 s HL 11B Section HL 12(1)(a): substituted, on 1 April 2008, by section 420(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 12(1)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 286 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 12(3) heading: added (with effect on 1 April 2008), on 7 Decem- ber 2009, by section 45(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section HL 12(3): added (with effect on 1 April 2008), on 7 December 2009, by section 45(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HL 12(4) heading: added (with effect on 1 April 2008), on 7 Decem- ber 2009, by section 45(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section HL 12(4): added (with effect on 1 April 2008), on 7 December 2009, by section 45(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HL 12 list of deﬁned terms Commissioner: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequen- tial Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section HL 12 list of deﬁned terms shareholder: inserted, on 1 April 2008, by section 420(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 13 Becoming portfolio investment entity Requirement for effective election An entity that makes an election under section HL 11 becomes a portfolio investment entity unless, in the period ending 12 months after the date on which the election would be effect- ive,— (a) the entity cancels the election: (1) 1580 Reprinted as at 1 January 2010 (b) Income Tax Act 2007 Part H s HL 13 the entity, if treated as becoming a portfolio invest- ment entity when the election would be effective, would cease under section HL 4 to be eligible through a failure to meet 1 or more of the requirements in section HL 6, HL 9, or HL 10 in each quarter of the 12-month period.
(2) (3) Income year for entity If an entity with a non-standard income year chooses to be- come a portfolio tax rate entity making payments of tax under section HL 22 or HL 24, section 39 of the Tax Administration Act 1994 applies as if— (a) the day before the day on which the election is effective were the original balance date of the entity; and the next 31 March after the day on which the election is effective were a new balance date approved by the Commissioner for the entity.
(b) Entity treated as disposing of, and reacquiring, property If an entity becomes a portfolio investment entity, the entity is treated for the purposes of this Act as, on the day before the day on which the election is effective,— (a) (ii) transferring to another person all shares held by the en- tity, or for which the entity is a share lender in a return- ing share transfer, that— (i) satisfy section CX 55(1)(a) and (b) (Proceeds from certain disposals by portfolio investment entities or New Zealand Superannuation Fund); and are shares in a company that is not a portfolio in- vestment entity and does not become a portfolio investment entity within the period of 6 months beginning from the day on which the entity be- comes a portfolio investment entity; and receiving for the shares referred to in paragraph (a) an amount of consideration equal to the market value of the shares at that time; and acquiring the shares referred to in paragraph (a) from the other person for an amount of consideration equal to the amount referred to in paragraph (b).
(b) (c) 1581 Part H s HL 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (3B) (4) Refund of FDP made before election If an FDPA company becomes a portfolio investment entity on a day in a tax year other than the end of the tax year, the balance of the company’s FDP account at the end of the tax year for the purposes of section RM 21(2)(c) (Refunds when loss balances used to reduce net income) is equal to the balance of the FDP account immediately before the company becomes a portfolio investment entity.
New Zealand Superannuation Fund The New Zealand Superannuation Fund is treated for the pur- poses of subsection (3) as if it made an election that would be effective on 1 October 2007.
Deﬁned in this Act: amount, Commissioner, company, group investment fund, life insurer, non-standard income year, portfolio investment entity, portfolio tax rate entity, share, superannuation fund, tax year Compare: 2004 No 35 s HL 12 Section HL 13(1)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 287 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 13(3)(a): amended, on 1 April 2008, by section 421(1) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 13(3B) heading: inserted, on 1 April 2008, by section 421(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 13(3B): inserted, on 1 April 2008, by section 421(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 14 Tax consequences from transition (1) When subsection (1B) applies Subsection (1B) applies when an entity chooses to become a portfolio investment entity in an income year and has an in- creased liability for provisional tax for the income year be- cause of the election.
No penalty or interest arising from transition (1B) The entity is not liable to pay any penalty or interest for which the entity would otherwise be liable for an inaccuracy, arising from the increased liability for provisional tax, in— (a) an estimate of provisional tax made before the entity chooses to become a portfolio investment entity: 1582 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 15 (b) a payment of provisional tax due before the end of the 2-month period beginning after the entity becomes a portfolio investment entity.
(2) Payment of tax liability arising from transition An entity that becomes a portfolio investment entity in a tax year and is liable to pay an amount of income tax (the tax amount) because of the disposal and acquisition referred to in section HL 13(3) may satisfy the liability by making payments to the Commissioner of at least— (a) one third of the tax amount, in the tax year in which the entity becomes a portfolio investment entity; and one half of the balance of the tax amount remaining owing after the payments made under paragraph (a), in the tax year following the tax year in which the entity becomes a portfolio investment entity; and the balance of the tax amount remaining owing after the payments made under paragraphs (a) and (b), in the sec- ond tax year following the tax year in which the entity becomes a portfolio investment entity.
(b) (c) Deﬁned in this Act: income tax, income year, interest, pay, portfolio investment entity, provisional tax, tax year Compare: 2004 No 35 s HL 13 Section HL 14(1) heading: substituted, on 1 April 2008, by section 422(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 14(1): substituted, on 1 April 2008, by section 422(1) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 14(1B) heading: inserted, on 1 April 2008, by section 422(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 14(1B): inserted, on 1 April 2008, by section 422(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 14 list of deﬁned terms pay: inserted, on 1 April 2008, by section 422(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 15 Ceasing to be portfolio investment entity (1) Cancellation or loss of eligibility An entity that has chosen to be a portfolio investment entity ceases to be a portfolio investment entity if— (a) the entity cancels the election under section HL 11: 1583 Part H s HL 16 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the entity is no longer eligible to be a portfolio invest- ment entity under section HL 4.
(2) (3) When entity ceases to be portfolio investment entity An entity ceases to be a portfolio investment entity under sub- section (1) on— (a) the day on which the entity’s election under section HL 11 is effective; or the ﬁrst day of the quarter following the quarter in which the entity ceases under section HL 4 to be eligible to be a portfolio investment entity.
(b) Entity treated as disposing of, and reacquiring, property An entity that ceases to be a portfolio investment entity is treated for the purposes of this Act as— (a) disposing of all shares held by the entity that satisfy section CX 55(1)(a) and (b) (Proceeds from certain dis- posals by portfolio investment entities or New Zealand Superannuation Fund) to another person for an amount of consideration equal to the market value of the shares at the time; and acquiring the shares referred to in paragraph (a) from the other person for an amount of consideration equal to the amount referred to in paragraph (a).
Deﬁned in this Act: amount, portfolio investment entity, quarter, share Compare: 2004 No 35 s HL 14 (b) Periods relevant to calculation of portfolio entity tax liability HL 16 Portfolio allocation period and portfolio calculation period When this section applies This section applies to a portfolio tax rate entity.
Portfolio allocation period The portfolio allocation period for the entity for a tax year is— a day, if the entity does not choose a portfolio allocation (a) period under paragraph (b), (c) or (d); or a month, if the entity has a portfolio calculation period of a quarter and chooses the portfolio allocation period by giving notice to the Commissioner— (b) (1) (2) 1584 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 16 (c) (d) before the tax year: (i) (ii) when the entity chooses to become a portfolio tax rate entity; or a quarter, if the entity chooses the portfolio allocation period by giving a notice to the Commissioner— (i) (ii) when the entity chooses to become a portfolio tax before the tax year: rate entity; or a day, month, quarter, or income year, if the entity chooses to have a portfolio calculation period of an income year under subsection (3)(c) and chooses the portfolio allocation period by giving a notice to the Commissioner at the same time as the choice under subsection (3)(c).
(3) Portfolio calculation period The portfolio calculation period for the entity for a portfolio allocation period in a tax year is— (a) a day, if the entity chooses the portfolio calculation period by giving a notice to the Commissioner— (i) (ii) when the entity chooses to become a portfolio tax before the tax year: rate entity; or (b) (c) a quarter, if the entity does not choose a portfolio cal- culation period under paragraph (a) or (c); or an income year, if the entity— (i) chooses under section HL 23 to pay provisional tax; and chooses the portfolio calculation period by giv- ing a notice to the Commissioner when the entity makes the election under section HL 23.
(ii) Deﬁned in this Act: Commissioner, notice, portfolio allocation period, portfolio calculation period, portfolio tax rate entity, quarter, tax year Compare: 2004 No 35 s HL 15 1585 Part H s HL 17 Income Tax Act 2007 Reprinted as at 1 January 2010 Allocation of income in some cases HL 17 Treatment of income from interest when entitlement conditional or lacking (1) (2) Treatment of unallocated income If a portfolio tax rate entity has income or property in which no investor has a portfolio investor interest and in which no investor is treated as having an interest under subsection (2), the portfolio tax rate entity is treated as being the sole investor in a portfolio investor class having a portfolio investor interest in the property or income.
Treatment of income from interest when entitlement conditional A portfolio tax rate entity that is a superannuation fund may for the purpose of section HL 21 allocate a portfolio investor interest to an investor for a portfolio allocation period if— (a) (b) (c) (d) (e) (f) the portfolio investor interest is purchased by or for the investor’s employer; and under an agreement between the investor and the in- vestor’s employer, subject to any contingencies, the investor will have an unconditional entitlement to the interest in or before the end of a period (the vesting period) beginning with the creation of the interest; and the agreement exists before the portfolio allocation period; and the vesting period ends after the portfolio allocation period; and for an entity that exists on 17 May 2006, the vesting period does not exceed the longest vesting period al- lowed by the entity on 17 May 2006 for an interest cre- ated on that date; and for an entity that does not exist on 17 May 2006,— (i) the portfolio investor interest is transferred to the entity by a superannuation scheme that exists on 17 May 2006 and without signiﬁcant change to the portfolio investor interest; or the vesting period does not exceed 5 years, if subparagraph (i) does not apply.
(ii) 1586 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 18 (3) Relationship with section CS 1 For the purposes of subsection (1), if a superannuation fund that has chosen to become a portfolio tax rate entity derives in- come under section CS 1 (Withdrawals), the income is treated as income in which no investor has a portfolio investor inter- est.
Deﬁned in this Act: income, investor, portfolio investor class, portfolio investor interest, portfolio tax rate entity, superannuation fund Compare: 2004 No 35 s HL 16 Section HL 17(2)(e): substituted, on 1 April 2008, by section 423 of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 17(2)(f): added, on 1 April 2008, by section 423 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 17(3) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 288(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 17(3): added (with effect on 1 April 2008), on 6 October 2009, by section 288(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HL 18 Certain new investors treated as part of existing portfolio investor class A person who becomes an investor in a portfolio tax rate en- tity may be treated by the entity as a member of an existing portfolio investor class, of which the investor would not be a member in the absence of this section, if— (a) the investor acquires portfolio investor interests that the entity intends to qualify the investor as a member of the class; and the interests do not qualify the investor as a member of the class because the entity does not have sufﬁcient portfolio entity investments corresponding to the inter- ests; and the entity acquires sufﬁcient portfolio entity invest- ments to qualify the investor as a member of the class as soon after the investor’s acquisition of the interests as is practicable.
(b) (c) Deﬁned in this Act: investor, portfolio investor class, portfolio investor interest, portfolio investor investment Compare: 2004 No 35 s HL 17 1587 Part H s HL 19 Income Tax Act 2007 Reprinted as at 1 January 2010 Calculating portfolio entity tax liability HL 19 Portfolio class net income and portfolio class net loss for portfolio allocation period Portfolio class net income for portfolio allocation period The portfolio class net income under this section for a port- folio investor class for a portfolio allocation period is— (a) the amount calculated for the period under subsection (3), if the calculated amount is more than zero; or zero, if paragraph (a) does not apply.
(b) Portfolio class net loss for portfolio allocation period The portfolio class net loss under this section for a portfolio investor class for a portfolio allocation period is— (a) the amount by which zero exceeds the amount calcu- lated for the period under subsection (3), if the calcu- lated amount is less than zero; or zero, if paragraph (a) does not apply.
(b) Calculation of amount for portfolio allocation period The amount calculated under this subsection for the portfolio allocation period is the amount calculated using the formula— class assessable income − class deductions.
Deﬁnition of items in formula In the formula,— (a) (b) the portfolio investor class; and the portfolio allocation period: class assessable income is the total amount of the en- tity’s assessable income allocated by the entity to— (i) (ii) class deductions is the total amount of the entity’s ex- penditure or loss— (i) (ii) for which the entity is allowed a deduction; and incurred by the portfolio investment entity in de- riving assessable income allocated to the port- folio investor class; and allocated by the entity to the portfolio allocation period.
(iii) Deﬁned in this Act: amount, assessable income, deduction, portfolio allocation period, portfolio class fraction, portfolio class net loss, portfolio entity invest- ment, portfolio investment entity, portfolio investor class Compare: 2004 No 35 s HL 18 (1) (2) (3) (4) 1588 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 20 HL 20 Portfolio class taxable income and portfolio class taxable loss for portfolio allocation period (1) (2) (3) (4) (5) (6) (7) Portfolio class taxable income for portfolio allocation period The portfolio class taxable income under this section for a portfolio investor class for a portfolio allocation period is— (a) the amount calculated for the period under subsection (3), if the calculated amount is more than zero; or zero, if paragraph (a) does not apply.
(b) Portfolio class taxable loss for portfolio allocation period The portfolio class taxable loss under this section for a port- folio investor class for a portfolio allocation period is— (a) the amount by which zero exceeds the amount calcu- lated for the period under subsection (3), if the calcu- lated amount is less than zero; or zero, if paragraph (a) does not apply.
(b) Calculation of amount for portfolio allocation period The amount calculated under this subsection for the portfolio investor class and the portfolio allocation period is calculated using the formula— class net income – class net loss – other loss used.

Deﬁnition of items in formulas The items in the formula are deﬁned in subsections (5) to (7).

Class net income Class net income is the amount of the portfolio class net in- come under section HL 19 of the class for the period.
Class net loss Class net loss is the amount of the portfolio class net loss under section HL 19 of the class for the period.
Other loss used Other loss used is the lesser of the following amounts: (a) the total amount for the class of— (i) the portfolio entity formation loss that is allo- cated to the portfolio allocation period and the portfolio investor class as allowed by section HL 30: the portfolio class land loss that has not been off- set against portfolio class net income for an ear- (ii) 1589 Part H s HL 21 Income Tax Act 2007 Reprinted as at 1 January 2010 lier allocation period and may be allocated to the allocation period under section HL 32: (b) the total amount of the class net income referred to in subsection (5).
Deﬁned in this Act: amount, portfolio allocation period, portfolio class land loss, portfolio class net income, portfolio class net loss, portfolio class taxable income, portfolio class taxable loss, portfolio entity formation loss, portfolio investor class, portfolio investor interest, tax year Compare: 2004 No 35 s HL 19 Section HL 20(3) formula: substituted (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 289 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HL 21 Portfolio entity tax liability and tax credits of portfolio tax rate entity for period Portfolio entity tax liability The portfolio entity tax liability of a portfolio tax rate entity, for a period (the calculation period) for which the entity is required to calculate the portfolio entity tax liability, is— (a) the total of the amounts calculated under subsection (3) for the calculation period and each portfolio investor class and each investor in the portfolio investor class to which the liability relates, if the total is more than zero; or zero, if paragraph (a) does not apply.
(b) Amount of tax credit under section LS 1 For the purposes of section LS 1 (Tax credits for portfolio tax rate entities relating to certain investors), the amount of a tax credit for a portfolio tax rate entity for a calculation period is— the amount by which zero exceeds the total of the (a) amounts calculated under subsection (3) for the calcu- lation period and each portfolio investor class and each investor in the portfolio investor class to which the tax credit relates, if the total is less than zero; or zero, if paragraph (a) does not apply.
(b) Calculation of amount for calculation period The amount calculated under this subsection for an investor in a portfolio investor class and for a calculation period is the total of the amounts calculated using the formula in subsection (4) for— (1) (2) (3) 1590 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 21 (a) (b) each day of a portfolio allocation period in the calcula- tion period; and each portfolio allocation period in the calculation period.
Formula The formula is— (4) (5) (6) (7) (8) (9) investor fraction × (income – loss) × rate days in allocation period – (expenses – credits) × rate.

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (6) to (12).

Investor fraction Investor fraction is the investor’s portfolio investor interest fraction on the day.

Income Income is the portfolio class taxable income under section HL 20 for the investor’s portfolio investor class and the portfolio allocation period.
Loss Loss is the portfolio class taxable loss under section HL 20 for the investor’s portfolio investor class and the portfolio al- location period.

Rate Rate is— (a) the portfolio investor rate for the investor for the port- folio allocation period, if paragraph (b) does not apply; or 30%, if the entity is treated as the sole investor under section HL 17.

(b) Days in allocation period (10) Days in allocation period is the number of days in the port- folio allocation period.
Expenses (11) Expenses is the total amount for the day in the portfolio allo- cation period of— 1591 Part H s HL 22 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) fees for ongoing management and administration ser- vices paid from or charged to the account of the investor as a member of the portfolio investor class: expenditure of the investor transferred under subpart DV (Expenditure speciﬁc to certain entities) to the en- tity.
Credits (12) Credits is the amount of credits for fees paid or credited by the entity to the account of the investor as a member of the portfolio investor class on the day in the portfolio allocation period.
Deﬁned in this Act: amount, investor, portfolio allocation period, portfolio class taxable income, portfolio investor class, portfolio investor interest frac- tion, portfolio investor rate, portfolio tax rate entity, tax credit, tax year Compare: 2004 No 35 s HL 20 Section HL 21(4) formula: amended, on 1 April 2008, by section 424(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 21(11) heading: substituted, on 1 April 2008, by section 424(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 21(11): substituted, on 1 April 2008, by section 424(2) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Payment by portfolio tax rate entity of tax for tax year HL 22 Payments of tax by portfolio tax rate entity making no election (1) (2) When this section applies This section applies to a portfolio tax rate entity for a tax year if the entity does not make an election under section HL 23 or HL 24 for the tax year.

Portfolio calculation period The portfolio calculation period of the entity for the tax year must be a quarter.
Income tax liability (2B) The income tax liability of the entity for a tax year is equal to the total portfolio entity tax liability of the entity for the portfolio calculation periods in the tax year.
1592 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 23 (3) (4) (5) Amount of payments After each portfolio calculation period for the tax year, the entity must make a payment to the Commissioner— (a) of an amount of income tax for the tax year equal to the part of the portfolio entity tax liability of the entity for the portfolio calculation period that does not relate to a payment by the entity under section HL 25; and within the period of 1 month beginning from the end of the portfolio calculation period.
(b) Entity not required to pay provisional tax The entity is not required to pay provisional tax under subpart RC (Provisional tax) for the tax year.
Payment to Commissioner of residual value of investor’s interest If an investor in the entity has, at the end of the investor’s port- folio investor exit period, a portfolio investor interest with a value of more than zero, the entity must pay an amount equal to the value of the interest to the Commissioner at the same time as the payment referred to in subsection (3) for the portfolio calculation period in which the portfolio investor exit period ends.
Deﬁned in this Act: Commissioner, income tax, interest, portfolio calculation period, portfolio entity tax liability, portfolio investor exit period, portfolio tax rate entity, provisional tax, quarter, tax year Compare: 2004 No 35 s HL 21 Section HL 22(2B) heading: inserted, on 1 April 2008, by section 425(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 22(2B): inserted, on 1 April 2008, by section 425(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 22(3)(a): amended, on 1 April 2008, by section 425(2) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 23 Payments of tax by portfolio tax rate entity choosing to pay provisional tax (1) When this section applies This section applies to a portfolio tax rate entity for a tax year if— 1593 Part H s HL 24 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (a) (b) the portfolio calculation period of the entity for the tax year is the income year corresponding to the tax year; and the entity chooses to be subject to this section for the tax year.
Provisional tax The entity must pay provisional tax under subpart RC (Provi- sional tax) for the income year corresponding to the tax year.

Notice of election The entity must give the Commissioner notice of an election to be subject to this section— (a) (b) in the prescribed form; and by the date by which the entity is required to choose a portfolio allocation period and portfolio calculation period for the tax year.
Deﬁned in this Act: Commissioner, notice, portfolio allocation period, portfolio calculation period, portfolio tax rate entity, provisional tax, tax year, year Compare: 2004 No 35 s HL 22 HL 24 Payments of tax by portfolio tax rate entity choosing to make payments when investor leaves (1) When this section applies This section applies to a portfolio tax rate entity for a tax year if— (a) the portfolio allocation period and the portfolio calcula- tion period of the entity for the tax year are 1 day; and the entity chooses to be subject to this section for the tax year.
(b) Income tax liability (1B) The income tax liability of the entity for a tax year is equal to the total portfolio entity tax liability of the entity for the portfolio calculation periods in the tax year.
Amount of payment for withdrawing investor After each portfolio investor exit period for an investor in a portfolio investor class, the entity must make a payment to the Commissioner— (a) of an amount of income tax for the tax year equal to the portfolio entity tax liability of the entity for— (2) 1594 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 24 (i) (ii) the portfolio investor exit period; and the investor as a member of the portfolio investor class; and (b) by the day that is— (i) the end of the month beginning from the end of the month in which the portfolio investor exit period ends, if subparagraph (ii) does not apply; or the 15 January following the end of the portfolio investor exit period, if the portfolio investor exit period ends in November.
(ii) (3) (4) (5) Amount of payment for investors remaining at end of tax year After each tax year, the entity must make a payment to the Commissioner— (a) of an amount of income tax equal to the entity’s port- folio entity tax liability for the tax year for the investors in the entity at the end of the tax year, allowing for any payment made under subsection (2) or section HL 25 by the entity for any of the investors; and within the period of 1 month beginning from the end of the tax year.
(b) Entity not required to pay provisional tax The entity is not required to pay provisional tax under subpart RC (Provisional tax) for the tax year.

Notice of election The entity must give the Commissioner notice of an election to be subject to this section— (a) (b) in the prescribed form; and by the date by which the entity is required to choose a portfolio allocation period and portfolio calculation period for the tax year.
Deﬁned in this Act: Commissioner, income tax, interest, investor, notice, port- folio allocation period, portfolio calculation period, portfolio entity tax liability, portfolio investor class, portfolio investor exit period, portfolio tax rate entity, provisional tax, tax year Compare: 2004 No 35 s HL 23 Section HL 24(1B) heading: inserted, on 1 April 2008, by section 426(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 24(1B): inserted, on 1 April 2008, by section 426(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

1595 Part H s HL 25 Income Tax Act 2007 Reprinted as at 1 January 2010 Section HL 24(2)(a): amended, on 1 April 2008, by section 426(2) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 24(2)(b): substituted, on 1 April 2008, by section 426(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

HL 25 Optional payments of tax by portfolio tax rate entities When this section applies This section applies when a portfolio tax rate entity pays an amount of tax under section HL 22 or HL 24 and an investor reduces the portfolio investor interest for which the investor is a member of a portfolio investor class of the entity.
Optional payment The entity may pay an amount of income tax to the Commis- sioner that represents an amount of its portfolio entity tax li- ability for the investor and the investor’s portfolio investor in- terest for the tax year.
Time of optional payment A payment under this section must be made by— (a) the end of the month beginning from the end of the month in which the portfolio calculation period ends, if paragraph (b) does not apply; or the 15 January following the end of the portfolio calcu- lation period, if the portfolio calculation period ends in November.
(b) Deﬁned in this Act: amount, Commissioner, income tax, investor, pay, port- folio calculation period, portfolio entity tax liability, portfolio investor interest, portfolio tax rate entity, tax year Compare: 2004 No 35 s HL 23B Section HL 25(1): amended, on 1 April 2008, by section 427(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 25(3) heading: substituted, on 1 April 2008, by section 427(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 25(3): substituted, on 1 April 2008, by section 427(2) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(1) (2) (3) 1596 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 26 Results for investors HL 26 Portfolio investor allocated income and portfolio investor allocated loss (1) (2) (3) (4) When this section applies This section applies to a person who is treated by a portfolio tax rate entity or portfolio investor proxy as an investor in a portfolio tax rate entity on a day in a tax year.
Portfolio investor allocated income for period The person is treated as deriving an amount of portfolio in- vestor allocated income in an income year from the portfolio tax rate entity.

The amount is equal to the greater of zero and the amount described in subsection (4) for portfolio allocation periods in the entity’s income year that ends in the person’s income year.
Portfolio investor allocated loss for period The person is treated as having an amount of portfolio in- vestor allocated loss in an income year in relation to the port- folio tax rate entity.
The amount is equal to,— (a) for a portfolio tax rate entity that pays tax under section HL 22 or HL 24, the greater of— (i) the amount by which zero is more than the amount described in subsection (4) for portfolio allocation periods in the entity’s income year that ends in the person’s income year: zero; or (ii) for a portfolio tax rate entity that pays tax under section HL 23, zero.
(b) Amount The amount that determines whether an investor has portfolio investor allocated income or portfolio investor allocated loss for a period containing portfolio allocation periods is the total of the amounts calculated using the formula in subsection (5) for— (a) (b) (c) each portfolio allocation period in the period; and each day of the portfolio allocation period; and each portfolio investor class to which the investor be- longs on the day.
1597 Part H s HL 26 Income Tax Act 2007 Reprinted as at 1 January 2010 Formula The formula is— (5) investor fraction × (income – loss) days in allocation period – (expenses – credits).
Deﬁnition of items in formula In the formula,— (a) (b) (c) (d) (e) investor fraction is the portfolio investor interest frac- tion of the investor as part of the portfolio investor class on the day: income is the amount under section HL 20 of the port- folio class taxable income for the portfolio allocation period: loss is the amount under section HL 20 of the portfolio class taxable loss for the portfolio investor class for the portfolio allocation period: days in period is the number of days in the portfolio allocation period: expenses is the total amount for the day in the portfolio allocation period of— (i) fees for ongoing management and administration services paid from or charged to the account of the investor as a member of the portfolio investor class: expenditure of the investor incurred in the in- vestor’s income year ending with the day and transferred under subpart DV (Expenditure spe- ciﬁc to certain entities) to the entity: (ii) (f) credits is the amount of credits for fees paid or credited by the entity to the account of the investor as a member of the portfolio investor class on the day in the portfolio allocation period.
Deﬁned in this Act: amount, investor, portfolio allocation period, portfolio class taxable income, portfolio class taxable loss, portfolio investment entity, port- folio investor allocated income, portfolio investor allocated loss, portfolio in- vestor class, portfolio investor interest fraction, portfolio investor proxy, tax year Compare: 2004 No 35 s HL 24 Section HL 26(5) formula: amended, on 1 April 2008, by section 428(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(6) 1598 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 27 Section HL 26(6)(e): substituted, on 1 April 2008, by section 428(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
HL 27 Treatment of portfolio investor allocated loss for zero-rated portfolio investors and investors with portfolio investor exit period (1) (2) When this section applies This section applies for an investor in a portfolio tax rate entity for a period in a tax year, if— (a) the investor is a zero-rated portfolio investor and the period is a tax year: the entity makes payments of income tax under section HL 22 and the period is a portfolio investor exit period for the investor.
(b) Deduction for excess of portfolio investor allocated loss The investor is allowed a deduction under section DB 53(1) (Portfolio investment entities: zero-rated portfolio investors and allocated losses) in the income year including the end of the portfolio tax rate entity’s income year of an amount equal to the total amount of portfolio investor allocated loss under section HL 26 for the period.
Deﬁned in this Act: amount, deduction, income tax, income year, investor, portfolio investor allocated loss, portfolio investor exit period, portfolio tax rate entity, tax year, zero-rated portfolio investor Compare: 2004 No 35 s HL 25 Section HL 27(2): amended, on 1 April 2008, by section 429(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 27 list of deﬁned terms income tax: inserted, on 1 April 2008, by section 429(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 27 list of deﬁned terms portfolio allocation period: repealed, on 1 April 2008, by section 429(2)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section HL 27 list of deﬁned terms portfolio investor allocated income: re- pealed, on 1 April 2008, by section 429(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 27 list of deﬁned terms portfolio tax rate entity: inserted, on 1 April 2008, by section 429(2)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
1599 Part H s HL 28 Income Tax Act 2007 Reprinted as at 1 January 2010 Tax credits for entity HL 28 Treatment of portfolio investor allocated loss for other investors (1) (2) Investor in entity making payments of tax under section HL 22 A portfolio tax rate entity that makes payments of tax under section HL 22 has a tax credit under section LS 1 (Tax credits for portfolio tax rate entities relating to certain investors) for a portfolio calculation period and an investor in a portfolio investor class if— (a) the portfolio calculation period does not include a part of a portfolio investor exit period for the investor; and the investor is not a zero-rated portfolio investor.
(b) Investor in entity making payments of tax under section HL 24 A portfolio tax rate entity that makes payments of tax under section HL 24 has a tax credit under section LS 1, for a tax year and an investor as a member of a portfolio investor class, at the time that the entity would be required to make a payment of tax in relation to the tax year and the investor if the entity were liable, or were to have chosen to make such a payment instead of having a tax credit.
Deﬁned in this Act: amount, deduction, income year, investor, portfolio allo- cation period, portfolio investment entity, portfolio investor allocated income, portfolio investor allocated loss, portfolio investor rate, tax credit, tax year, zero-rated portfolio investor Compare: 2004 No 35 s HL 26 HL 29 Credits received by portfolio tax rate entity or portfolio investor proxy When this section applies This section applies to an entity that receives an imputation credit, a credit for tax paid in a foreign country or territory, or a credit for tax paid or withheld if the entity is— (a) a portfolio tax rate entity that has not made an election under section HL 23: a portfolio investor proxy for an investor in a portfolio tax rate entity that has not made an election under sec- tion HL 23.
(b) (1) 1600 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 29 (2) (3) Use of credit by entity The entity may not, except as allowed by this section,— (a) use the credit to reduce the liability of the entity for income tax or to obtain a refund of income tax: attach the credit to any distribution or transfer the credit to any other person.
(b) Tax credit allocated to investor For a portfolio allocation period and a portfolio investor class to which the entity allocates a credit, the amount of the credit that is allocated to an investor is the total of the amounts cal- culated using the formula in subsection (4) for each day of the period.
Formula The formula is— (4) (5) (6) Deﬁnition of items in formula In the formula in subsection (4),— (a) credit is the amount of the credit received by the entity in relation to the portfolio entity investment that gives rise to the credit: class fraction is the portfolio class fraction, of the in- vestor’s portfolio investor class, in relation to the port- folio entity investment: investor fraction is the portfolio investor interest frac- tion of the investor: days in period is the number of days in the portfolio allocation period.
(b) (c) (d) Application of subsections (7) to (11) For an investor in a portfolio tax rate entity who is allocated under subsection (3) credits for a portfolio calculation period in an income year of the entity,— (a) subsections (7) and (8) apply to the credits, and the credits are allocated to the income year in which the en- tity’s income year ends, if— (i) (ii) the investor is a zero-rated portfolio investor: the investor is not a zero-rated portfolio investor and the entity makes payments of tax under sec- 1601 Part H s HL 29 Income Tax Act 2007 Reprinted as at 1 January 2010 tion HL 22 and the portfolio calculation period includes part of a portfolio investor exit period: subsections (10) and (11) apply to the credits if para- graph— does not apply.
(b) (a) Zero-rated portfolio investors and certain investors having portfolio investor exit period: credit The investor is treated as receiving for the allocated credits, for the tax year corresponding to the investor’s income year or, in the case of an investor having a portfolio investor exit period, for the quarter to which the portfolio investor exit period re- lates,— (a) a credit against income tax payable by the investor of the amount given by subsection (8) if— (i) the credits are under subpart LJ (Tax credits for foreign income tax); and the investor is not a portfolio tax rate entity or portfolio investor proxy; or (ii) (b) the allocated amount of each type of credit if— the credits are not under subpart LJ: (i) the investor is a portfolio tax rate entity or port- (ii) folio investor proxy.
Amount of credit for foreign tax: zero-rated portfolio investors, other than portfolio tax rate entities and portfolio investor proxies, and investors having portfolio investor exit period An investor to whom subsection (7)(a) applies is treated as receiving for the tax year, for credits under subpart LJ, a credit that is the lesser of— (a) (b) the amount of the allocated credits: the amount calculated by multiplying the amount of portfolio investor allocated income for the investor for the tax year by,— (i) for an investor other than a zero-rated portfolio investor, the investor’s portfolio investor rate for the portfolio allocation period ending before the investor’s portfolio investor exit period; or for a zero-rate portfolio investor, the basic rate of tax for the investor for the tax year under sched- (ii) (7) (8) 1602 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 29 ule 1 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts).
Investor with portfolio investor exit period for interest in entity that makes payments under section HL 24 [Repealed] [Repealed] (9) Other investors: credit for entity for foreign tax credits (10) The entity is treated as receiving for the tax year of the port- folio calculation period, for credits under subpart LJ allocated to a portfolio investor class and an investor other than a zero- rated portfolio investor as a member of the portfolio investor class, a credit of an amount set out in subsection (12) against income tax payable by the entity as described in subsection (11).
Use of credit (11) The credit is against income tax payable by the entity for— (a) (b) the portfolio calculation period and portfolio calcula- tion periods— (i) later in the tax year, if the entity pays tax under section HL 22; or earlier or later in the tax year, if the entity pays tax under section HL 24; and (ii) the investor as a member of— (i) (ii) the portfolio investor class: another portfolio investor class, chooses such a use for the credit.
if the entity Amount of credit (12) The amount of the credit is the lesser of the following: (a) the total of— (i) (ii) the credits allocated to the portfolio calculation period and the investor as a member of the port- folio investor class; and the credits allocated to earlier portfolio calcula- tion periods in the tax year and the investor that are not used by the entity as a credit against in- come tax payable for those portfolio calculation periods and for the investor as a member of the 1603 Part H s HL 29 Income Tax Act 2007 Reprinted as at 1 January 2010 portfolio investor class or another portfolio in- vestor class: (b) the amount of the entity’s portfolio entity tax liability— for the investor as a member of the portfolio in- (i) vestor class or another portfolio investor class; and the portfolio calculation period and earlier port- folio calculation periods in the tax year; and not met by a credit allocated to an earlier port- folio calculation period.
(iii) (ii) Other investor: credit for entity for other credits (13) The amount of the credits not under subpart LJ allocated to the investor under subsection (3) is treated as— (a) a credit against tax payable by the entity of the amount that is the lesser of the following: (i) (ii) the amount of the credits: the amount referred to in subsection (12)(b):, re- duced by the amount of the credit given by sub- section (12): (b) a tax credit under section LS 1 (Tax credits for portfolio tax rate entities relating to certain investors), for the en- tity and the portfolio calculation period, of the amount of the credits that is not used under paragraph (a).
Deﬁned in this Act: amount, income tax, investor, net income, portfolio al- location period, portfolio class fraction, portfolio entity investment, portfolio investment entity, portfolio investor allocated income, portfolio investor class, portfolio investor exit period, portfolio investor interest fraction, portfolio in- vestor proxy, tax credit, tax year, zero-rated portfolio investor Compare: 2004 No 35 s HL 27 Section HL 29(6) heading: substituted, on 1 April 2008, by section 430(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 29(6): substituted, on 1 April 2008, by section 430(1) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 29(6)(a)(ii): amended (with effect on 1 April 2008), on 6 October 2009, by section 290(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 29(7) heading: substituted, on 1 April 2008, by section 430(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 29(7): substituted, on 1 April 2008, by section 430(2) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

1604 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 30 Section HL 29(7): amended (with effect on 1 April 2008), on 6 October 2009, by section 290(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HL 29(8) heading: substituted, on 1 April 2008, by section 430(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 29(8)(b)(ii): amended, on 1 April 2008, by section 562 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 29(9) heading: repealed, on 1 April 2008, by section 430(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 29(9): repealed, on 1 April 2008, by section 430(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 29(11)(a)(i): amended (with effect on 1 April 2008), on 6 October 2009, by section 290(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HL 29(11)(a)(ii): amended, on 1 April 2008, by section 430(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section HL 29(11)(b): substituted, on 1 April 2008, by section 430(6) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 29(13)(a)(ii): amended, on 1 April 2008, by section 430(7)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section HL 29(13)(a)(ii): amended, on 1 April 2008, by section 430(7)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Treatment of losses for entity HL 30 Portfolio entity formation loss (1) (2) Portfolio entity formation loss The portfolio entity formation loss of a portfolio investment entity is the total amount for the entity, at the time the entity becomes a portfolio investment entity, of a loss balance arising from a period ending before the entity becomes a portfolio investment entity that may be carried forward under subpart IA (General rules for tax losses) to the quarter in which the entity becomes a portfolio investment entity.
Carrying forward portfolio entity formation loss of entity other than portfolio tax rate entity The portfolio entity formation loss of a portfolio investment entity that is not a portfolio tax rate entity or that makes pay- ments of income tax under section HL 23 may be carried for- ward under subpart IA to an income year in which the entity is a portfolio investment entity.
1605 Part H s HL 30 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Amount of formation loss available for allocation The maximum amount of portfolio entity formation loss that a portfolio tax rate entity may allocate to a portfolio allocation period (the relevant period) is— (a) the amount of the loss that has not been allocated to an earlier portfolio allocation period if, at the time the entity becomes a portfolio investment entity, the amount of the loss is less than 5% of the total market value of the entity’s portfolio entity investments; or the amount calculated using the formula in subsection (4), if paragraph (a) does not apply.
(b) Formula The formula referred to in subsection (3)(b) is— (4) Deﬁnition of items in formula In the formula in subsection (4),— (a) initial loss is the amount of portfolio entity formation loss at the time the entity becomes a portfolio invest- ment entity: days is— (i) the number of days in the period beginning with the day on which the entity becomes a portfolio investment entity and ending on the last day of the relevant period, if that number is less than or equal to 1095; or 1095, if paragraph (a) does not apply: (ii) loss used is the amount of portfolio entity formation loss allocated to portfolio allocation periods before the relevant period.
(b) (c) Amount of formation loss available for allocation to investor class The maximum amount of portfolio entity formation loss that a portfolio tax rate entity may allocate to a portfolio investor class for a relevant period is the lesser of the following amounts: (a) the maximum amount of portfolio entity formation loss for the relevant period set out in subsection (3): (5) (6) 1606 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 31 (b) the amount calculated using the formula— (7) Deﬁnition of items in formula In the formula in subsection (6)(b),— (a) class net income is the amount of portfolio class net income for the portfolio investor class for the portfolio allocation period: credits is the total amount allocated to the portfolio investor class and the relevant period of— imputation credits: (i) (ii) Maori authority credits: credits for RWT: (iii) (iv) FDP credits: rate is the rate of tax for companies set out in schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RWT, and attributed fringe beneﬁts).
(b) (c) Deﬁned in this Act: amount, FDP credit, imputation credit, loss balance, Maori authority credit, net income, portfolio allocation period, portfolio class net in- come, portfolio entity formation loss, portfolio entity investment, portfolio in- vestment entity, portfolio investor class, portfolio tax rate entity, RWT, tax credit Compare: 2004 No 35 s HL 28 Section HL 30(7)(c): amended (with effect on 1 April 2008), on 6 October 2009, by section 291 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HL 31 Portfolio class taxable income and portfolio class taxable loss for tax year (1) (2) Portfolio class taxable income for tax year The portfolio class taxable income under this section for a portfolio investor class for a tax year is— (a) the amount calculated for the tax year under subsection (3), if the calculated amount is more than zero; or zero, if paragraph (a) does not apply.
(b) Portfolio class taxable loss for tax year The portfolio class taxable loss under this section for a port- folio investor class for a tax year is— 1607 Part H s HL 32 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) (6) (a) (b) the amount by which zero exceeds the amount calcu- lated for the tax year under subsection (3), if the calcu- lated amount is less than zero; or zero, if paragraph (a) does not apply.
Calculation of amount for tax year The amount calculated under this subsection for the portfolio investor class and the tax year is the total of the amounts calcu- lated for each portfolio allocation period in the tax year using the formula— class tax income − class tax loss.

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (5) and (6).
Class tax income Class tax income is the amount of the portfolio class taxable income under section HL 20 of the portfolio investor class for the portfolio allocation period.

Class tax loss Class tax loss is the amount of the portfolio class taxable loss under section HL 20 of the portfolio investor class for the portfolio allocation period.
Deﬁned in this Act: amount, portfolio allocation period, portfolio class taxable income, portfolio class taxable loss, portfolio investor class, portfolio investor interest fraction, tax year Compare: 2004 No 35 s HL 29 HL 32 Treatment of portfolio class taxable loss and portfolio class land loss for tax year Portfolio class taxable loss for tax year other than portfolio class land loss If a portfolio investor class of an entity paying tax under sec- tion HL 22 or HL 24 has, for a portfolio calculation period, a portfolio class taxable loss that is not a portfolio class land loss, the portfolio class taxable loss may not be carried forward to a later portfolio calculation period.
Portfolio class land loss for tax year If a portfolio investor class has a portfolio class land loss for a portfolio calculation period, the portfolio class land loss may be carried forward for the portfolio investor class to following (1) (2) 1608 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HL 33 portfolio calculation periods and used to reduce the amount of portfolio class taxable income under section HL 20 for a later portfolio allocation period.
(3) Meaning of portfolio class land loss A portfolio class land loss, for a portfolio investor class, means the portfolio class taxable loss of the portfolio investor class for a portfolio calculation period— (a) at the end of which, the class has interests in portfolio entity investments that— (i) are investments in land or shares in a portfolio land company; and have a portfolio class investment value that is more than 50% of the portfolio class investment value for all portfolio entity investments in which the class has interests; and (ii) (b) for which the class has a portfolio class taxable loss of more than zero.
Deﬁned in this Act: land, net income, net loss, portfolio class investment value, portfolio class land loss, portfolio class taxable income, portfolio class taxable loss, portfolio entity investment, portfolio investment entity, portfolio investor class, portfolio land company, tax year Compare: 2004 No 35 s HL 30 Portfolio investor proxies HL 33 Portfolio investor proxies (1) Eligibility of person to be portfolio investor proxy An entity is eligible to be a portfolio investor proxy for an in- vestor in a portfolio investment entity for a portfolio allocation period if— (a) the portfolio investment entity is not a portfolio listed company; and the entity holds a portfolio investor interest for an in- vestor in the portfolio investment entity; and the entity gives to the portfolio investment entity— (i) a notice that the entity is holding the portfolio in- vestor interest as a portfolio investor proxy; and the Commissioner re- other information that quires the entity to provide with the notice.
(ii) (b) (c) 1609 Part H s HL 33 Income Tax Act 2007 Reprinted as at 1 January 2010 Role of portfolio investor proxy An entity who is a portfolio investor proxy holding a port- folio investor interest for an investor for a portfolio allocation period must perform the responsibilities given by subsection (3) in relation to amounts allocated to the entity as holder of the interest for the period as if— (a) (b) the entity were a portfolio investment entity; and the portfolio investor interest were an interest of the investor in the income of the entity; and the portfolio investor allocated income, portfolio in- vestor allocated loss, and distributions received by the entity for the investor were income or loss— (i) (ii) of the entity; and to which the investor is entitled by the portfolio investor interest.
(c) Responsibilities of portfolio investor proxy The responsibilities of an entity referred to in subsection (2) in relation to amounts allocated to the entity are to— (a) allocate, to the investor, portfolio investor allocated in- come and portfolio investor allocated loss for the port- folio allocation period; and distribute, to the investor, distributions and credits for the period; and pay income tax on portfolio investor allocated income for the period; and adjust the portfolio investor interest of the investor, or the distributions to the investor, to reﬂect the effect of the investor’s portfolio investor rate on the amount of distributions under paragraph (b) and payments under paragraph (c); and provide to the Commissioner— (i) returns relating to the allocations, distributions, credits, and payments referred to in paragraphs (a) to (c); and other information that quires the entity to provide; and the Commissioner re- (ii) provide to each portfolio investment entity in which the portfolio investor proxy holds portfolio investor inter- ests for investors in a portfolio investor class, informa- (b) (c) (d) (e) (f) (2) (3) 1610 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HR 2 tion concerning the investors and the portfolio investor interests that may be relevant to whether the portfolio investment entity meets the eligibility requirements for the entity.
Deﬁned in this Act: Commissioner, income, income tax, investor, loss, notice, portfolio allocation period, portfolio investment entity, portfolio investor allo- cated income, portfolio investor allocated loss, portfolio investor class, portfolio investor interest, portfolio investor proxy, portfolio investor rate, tax year Compare: 2004 No 35 s HL 31 Section HL 33(3)(d): amended, on 1 April 2008, by section 431 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subpart HR—Other entities Partnerships and joint ventures HR 1 Partnerships and joint ventures [Repealed] Section HR 1: repealed, on 1 April 2008, by section 20(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).

HR 2 Group investment funds Funds (1) (2) (3) Separate returns The trustee of a group investment fund must provide for a tax year under section 33 of the Tax Administration Act 1994, separate returns of its category A income and its category B income.
Designated group investment fund, category B income: application of trust rules If the trustee of a group investment fund derives an amount that is income derived from investments and funds of a designated group investment fund or category B income, the amount is treated as income derived by the trustee and the trust rules apply.
Category A income: application of company rules If the trustee of a group investment fund derives from the in- vestments and funds of the group investment fund an amount 1611 Part H s HR 3 Income Tax Act 2007 Reprinted as at 1 January 2010 that is category A income, the amount is treated as income of a notional company.
Deﬁned in this Act: amount, category A income, category B income, designated group investment fund, group investment fund, income, return of income, tax year, trust, trust rules, trustee Compare: 2004 No 35 s HE 2(1), (1A) HR 3 Deﬁnitions for section HR 2: group investment funds Category A income Category A income, for a group investment fund other than a designated group investment fund in an income year, means the amount of income derived from the investments and funds of the group investment fund that is calculated using the for- mula— Deﬁnitions for items in formula In the formula,— (a) last day value is the current value of all investments and funds of the group investment fund on the last day of the income year: designated source investments is the current value of the designated source investments in the group invest- ment fund on the last day of the income year: pre-1983 investments is the current value of the pre- 1983 investments in the group investment fund on the last day of the income year: income is the total income derived from all investments and funds of the group investment fund in the income year.
(b) (c) (d) Category B income Category B income, for a group investment fund other than a designated group investment fund, means the income derived from investments and funds of the group investment fund that is not category A income for the income year.
(1) (2) (3) 1612 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HR 3 (4) (5) Current value Current value, for a group investment fund and a day in an income year, means the capital value, as deﬁned by the Trustee Companies Act 1967 or the Public Trust Act 2001, of the investments and funds of the group investment fund that is— (a) either— (i) (ii) last determined before the day under section 31 of the Trustee Companies Act 1967 or section 66 of the Public Trust Act 2001; or determined on the day, if that day is the day on which the capital value is determined; and for the purposes of the deﬁnition of designated source investments in subsection (7), and pre-1983 in- vestments in subsection (8), determined as if those investments and funds comprised all the investments and funds in the group investment fund at the time.
(b) Designated sources Designated sources, for a group investment fund, means a trust, other than the trust under which the fund is established, whose trustee is a trustee of the group investment fund, that— (a) is created— (i) (ii) (iii) (iv) (v) (vi) by will or codicil, or by order of court varying or modifying the provisions of a will or codicil; or on intestacy, including a partial intestacy, or by an order of court varying or modifying, in rela- tion to an estate, the application of the law relat- ing to the distribution of intestate estates; or by an order of court; or by an enactment; or to administer funds that are compensation or other money arising from the death of, or injury to, a person; or to vary the terms of a will or codicil or, in rela- tion to an estate, to vary the application of the law relating to the distribution of intestate es- tates, in either case for the sole purpose of ef- fecting a settlement out of court of an applica- tion made, or proposed to be made, under the 1613 Part H s HR 3 Income Tax Act 2007 Reprinted as at 1 January 2010 Family Protection Act 1955 or a claim, or a pro- posed claim, to be made under the Law Reform (Testamentary Promises) Act 1949, if the terms are mainly the same as those likely to have been ordered by the court: (b) is not carried on for the private beneﬁt of an individual whose funds are applied entirely or mainly for benevo- lent, philanthropic, cultural, or public purposes in New Zealand.
Designated group investment fund Designated group investment fund means a group invest- ment fund whose investments and funds are invested wholly— in investments authorised under section 4(1)(a) to (j) (a) of the Trustee Act 1956, which is interpreted as if the Trustee Amendment Act 1988 had not been enacted, and are not investments authorised solely by the instru- ment creating the trust under which the fund is estab- lished; or in, and for the purposes of, the carrying on of a forestry business on land in New Zealand, to the extent to which the investments and funds are invested in the land that the fund owned or otherwise held on 22 June 1983 for the purposes of the forestry business.
(b) Designated source investments Designated source investments, for a group investment fund at any time, means investments and funds from designated sources invested at the time in the group investment fund.
Pre-1983 investments Pre-1983 investments, for a group investment fund at any time, means investments and funds that were invested in the group investment fund at 22 June 1983, other than designated source investments, as if those investments and funds had con- tinued to be invested at the time, including— (a) money deposited between 15 June and 23 June 1983 with the trustee of the group investment fund for invest- ment in the fund; and (b) money deposited between 22 June and 16 July 1983 with the trustee of the group investment fund for invest- (6) (7) (8) 1614 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HR 5 ment in the fund, which, on or before 22 June 1983, was subject to a binding commitment to deposit that money.
Deﬁned in this Act: amount, business, category A income, category B income, Commissioner, current value, designated group investment fund, designated source investments, designated sources, group investment fund, income, in- come year, New Zealand, pre-1983 investments, trustee Compare: 2004 No 35 ss HE 2(2), (3), OB 1 category A income, category B income, current value, designated group investment fund, group invest- ment fund HR 4 Government Superannuation Fund The Government Superannuation Fund Authority is treated for income tax purposes as if the Government Superannuation Fund were a superannuation scheme that is a trust and the Au- thority the trustee of that scheme.
Deﬁned in this Act: income tax, Government Superannuation Fund, superannu- ation scheme, trust, trustee Compare: 2004 No 35 s HJ 1 HR 5 Airport operators: general Airport operators (1) (2) (3) (4) When this section applies This section and sections HR 6 and HR 7 apply to determine for this Act certain aspects of the treatment of an airport op- erator that is a joint venture between the Crown and a local authority.

Company The airport operator is treated as a company.
Shares in company Each joint venturer is treated as holding shares in the company in proportion to their share of the proﬁts of the joint venture, as determined under the joint venture agreement (after allowing for adjustments for earlier income years).

Separate from joint ventures The airport operator is treated as a person separate from— (a) (b) (c) the Crown; and each airport authority; and each other person.
1615 Part H s HR 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (5) (6) (7) (8) Neither public nor local authority The airport operator is treated as neither a public authority nor a local authority.

Not subject to mutual association rules The airport operator is not treated as a mutual association for the purposes of subpart HE (Mutual associations).
Interest-bearing funding Subsection (8) applies to the extent to which— (a) a joint venturer provides funds for the airport operator’s activities; and the joint venturers expressly agree that the funds are to be provided for the airport operator’s activities; and the funds are provided for consideration in the nature of interest payable by the airport operator.

(b) (c) Funding The funds are treated as money borrowed by the airport oper- ator and the consideration is treated as interest.
Deﬁned in this Act: airport authority, airport operator, airport operator’s activ- ities, association, company, interest, local authority, public authority, share Compare: 2004 No 35 s OC 1(2) HR 6 Airport operator’s assets Ownership of airport assets An airport operator is treated as owning each of its airport assets.
Time of acquisition An airport operator is treated as having acquired an asset at the time— (a) (b) (c) it acquired it other than by way of purchase: it agreed to use it: it started to have the power to use it.

Cost of acquisition An airport operator is treated as having incurred, in acquiring an asset, its market value at the time of acquisition.
(1) (2) (3) 1616 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HR 6 (4) (5) (6) (7) Ceasing to be airport asset If an asset ceases to be an airport asset of the airport operator, other than on sale, the airport operator is treated as having sold it, at the time, for a price equal to its market value at the time.
Disputes concerning value or timing Subsection (6) applies if a question arises concerning— (a) (b) (c) the market value of an asset: the cost of an airport asset: the time at which an airport operator acquired, agreed to use, or started to have the power to use an asset.

Resolved by agreement or Commissioner The question must be resolved by agreement between the air- port operator and the Commissioner or, failing agreement, by the Commissioner.
(b) Meaning of airport asset In this section, for an airport operator, airport asset means— an asset that, under the joint venture agreement and for (a) the purposes of the airport operator’s activities, the air- port authority— acquires: (i) agrees to use: (ii) is given the power to use: (iii) an asset owned by a person for the purposes of a depre- ciation sinking fund for an airport asset: an asset owned by a person for the purposes of a loan redemption sinking fund for a loan on which the interest payments are a charge against the joint venture income of the airport operator: an asset acquired by the airport operator using funds that are, or by exchanging property that is, acquired in carry- ing on the airport operator’s activities and not allocated or distributed to the joint venturers.
(d) (c) (8) Exclusion Subsection (7)(a) does not apply to an asset that— (a) the airport operator has— disposed of: (i) ceased to agree to use: (ii) ceased to have the power to use: (iii) 1617 Part H s HR 7 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the airport operator has acquired, agreed to use or ac- quired the power to use under a lease, unless the lease is a speciﬁed lease or a ﬁnance lease.
Deﬁned in this Act: acquire, airport asset, airport authority, airport operator, airport operator’s activities, Commissioner, ﬁnance lease, interest, loan, speci- ﬁed lease Compare: 2004 No 35 s OC 1(2)–(6) HR 7 Meaning of airport operator’s activities (1) (2) Meaning of airport operator’s activities In sections HR 5 and HR 6, airport operator’s activities means the following activities undertaken for the purposes of the airport operator’s joint venture agreement concerning the airport, including the airport’s approaches, buildings and equipment: (a) (b) (c) (d) (e) its establishment: its improvement: its maintenance: its operation: its management.
Meaning of airport In this section, airport has the meaning given in section 2 of the Airport Authorities Act 1966.
Deﬁned in this Act: airport, airport operator, airport operator’s activities Compare: 2004 No 35 s OC 1(6) Transitional residents HR 8 Transitional residents Provisions under which transitional resident treated as non-resident (1) When a foreign-sourced amount is derived by a transitional resident, the following provisions apply to produce a result for income tax purposes that is the same as if the transitional resident were non-resident: (a) sections CD 45, CE 2, CQ 2, CQ 5, and CW 27 (which relate to income): sections DN 2 and DN 6 (which relate to deductions): (b) 1618 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HR 8 (c) (d) (e) (f) (g) (h) sections EW 5, EW 37, EW 41, EX 16, EX 41, and EX 64 (which relate to the ﬁnancial arrangements rules and to the CFC and FIF rules): sections HC 25, HC 26, and HC 30 (which relate to the trust rules): sections MC 5, MC 10, MD 7, and MF 5 (which relate to tax credits): sections RE 2, RE 5 and RF 12 (which relate to the RWT and NRWT rules): section YD 1 (Residence of natural persons): section 41 of the Tax Administration Act 1994.
(2) (3) Meaning of transitional resident A person is a transitional resident if— (a) they are resident in New Zealand through acquiring a permanent place of abode as described in section YD 1(2) or through the 183-day rule set out in section YD 1(3); and for a continuous period (the non-residence period) of at least 10 years immediately before they meet the re- quirements of section YD 1(2) and (3), ignoring the rule in section YD 1(4), (Residence of natural persons) for becoming resident in New Zealand, they— (i) (ii) were not resident in New Zealand; and they were not a transitional resident before the non-resi- dence period; and they have not ceased to be a transitional resident after the end of the non-residence period.
did not meet the requirements of that section: (b) (c) (d) Natural persons A natural person who meets the requirements of subsection (2) and does not make an election under subsection (4) is a transitional resident for a period— (a) beginning from the ﬁrst day of the residence required by subsection (2)(a); and ending on the day that is the earlier of— (i) (b) the day before the person stops being a New Zealand resident: the last day of the 48th month after the month in which they meet the requirements of section (ii) 1619 Part H s HR 8 Income Tax Act 2007 Reprinted as at 1 January 2010 YD 1(2) and (3), ignoring the rule in section YD 1(4),.
Choosing not to be transitional resident A person who would otherwise be a transitional resident in an income year may choose by notice to the Commissioner or by notice under subsection (5) not to be a transitional resident for a period— (a) (b) beginning on or after the start of the income year; and ending immediately before the person stops meeting the requirements of subsection (2).
Applying for tax credits An application under section 41 of the Tax Administration Act 1994 by a person who is eligible to be a transitional resident for a tax credit under subparts MA to MF and MZ (which relate to tax credits for families) for an income year is treated for the period of the application as— (a) a notice of election under subsection (4) by the person if they have not made one; and a notice of election under subsection (4) by a spouse, civil union partner, or de facto partner of the person.
(b) Election irrevocable An election under subsection (4) is irrevocable.

Notice of election A notice under subsection (4) to stop being a transitional resi- dent must be received by the Commissioner by— (a) the time within which the person’s return of income must be ﬁled under section 37 of the Tax Administra- tion Act 1994; or if the person or their tax agent applies for it, a further time allowed by the Commissioner.
(b) Deﬁned in this Act: foreign-sourced amount, New Zealand resident, non-resi- dent, notice, resident in New Zealand, tax credit, transitional resident Compare: 2004 No 35 ss FC 22—FC 24 Section HR 8(1) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 293(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HR 8(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 293(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

(4) (5) (6) (7) 1620 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HR 9 Section HR 8(2)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 293(2)(a) of the Taxation (International Taxation, Life Insur- ance, and Remedial Matters) Act 2009 (2009 No 34).
Section HR 8(2)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 293(2)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HR 8(3)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 293(3)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HR 8(3)(b)(ii): amended (with effect on 1 April 2008), on 6 October 2009, by section 293(3)(b) of the Taxation (International Taxation, Life Insur- ance, and Remedial Matters) Act 2009 (2009 No 34).

Section HR 8(4): amended (with effect on 1 April 2008), on 6 October 2009, by section 293(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HR 8(7) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 293(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HR 8(7): added (with effect on 1 April 2008), on 6 October 2009, by section 293(5) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
RMBS special purpose vehicles Heading: added (with effect on 1 April 2008), on 6 October 2009, by section 294(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
HR 9 RMBS special purpose vehicles are transparent For the purposes of the liabilities and obligations under an In- land Revenue Act of a registered bank described in the deﬁn- ition of RMBS special purpose vehicle, paragraph (b), and the relevant RMBS special purpose vehicle,–– (a) the registered bank is treated as carrying on an activity carried on by the RMBS special purpose vehicle, and having a status, intention, and purpose of the RMBS special purpose vehicle, and the RMBS special purpose vehicle is treated as not carrying on that activity or hav- ing that status, intention, or purpose: the registered bank is treated as holding property that the RMBS special purpose vehicle holds, and the RMBS special purpose vehicle is treated as not holding that property: (b) 1621 Part H s HR 10 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) (d) the registered bank is treated as being party to any ar- rangement to which the RMBS special purpose vehicle is a party, and the RMBS special purpose vehicle is treated as not being that party to that arrangement: the registered bank is treated as doing a thing and being entitled to a thing that the RMBS special purpose ve- hicle does or is entitled to, and the RMBS special pur- pose vehicle is treated as not doing that thing or being entitled to that thing.
Deﬁned in this Act: arrangement, Inland Revenue Acts, registered bank, RMBS special purpose vehicle Section HR 9: added (with effect on 1 April 2008), on 6 October 2009, by section 294(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

HR 10 What happens when vehicle stops being RMBS special purpose vehicle?
Property transferred and parties reconstituted (1) When a company or a trustee of a trust (the vehicle) stops being an RMBS special purpose vehicle for any reason, other than on unwind, the following apply: (a) the relevant registered bank is treated as disposing of its property (the property) that has been subject to section HR 9(b) in relation to the vehicle immediately before the vehicle stops being an RMBS special purpose ve- hicle: the vehicle is treated as acquiring the property imme- diately after the vehicle stops being an RMBS special purpose vehicle: the relevant registered bank is treated as not being a party to an arrangement (the arrangement) that it was treated as being a party to under section HR 9(c) in relation to the vehicle immediately before the vehicle stops being an RMBS special purpose vehicle: the vehicle is treated as being a party to the arrangement immediately after the vehicle stops being an RMBS spe- cial purpose vehicle.
(b) (c) (d) 1622 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HZ 1 (2) (3) (4) Property transferred: market value The disposition of property in subsection (1)(a) and the acqui- sition of property in subsection (1)(b) are treated as occurring with a single third party for a payments equal to the property’s market value.
Parties reconstituted: consideration At the time the registered bank or the vehicle becomes a party to an arrangement under subsection (1)(c) or (d), the market value, at that time, of consideration that has been paid, or is or will be payable, to or by the registered bank or vehicle (as applicable) for or under the arrangement, ignoring section HR 9(c), is treated as consideration that has been paid, or is or will be payable, to or by the registered bank or vehicle for or under the arrangement.
Deﬁnition In this section, unwind means a process, ignoring section HR 9, by which–– (a) residential mortgage backed securities held by the relevant registered bank or the Reserve Bank of New Zealand are cancelled; and interests described in the deﬁnition of RMBS special purpose vehicle, paragraph (b), are transferred to the registered bank; and the vehicle is terminated, by liquidation or otherwise.
(c) Deﬁned in this Act: arrangement, company, consideration, dispose, liquidation, registered bank, residential mortgage backed securities, RMBS special purpose vehicle, trustee, unwind (b) Section HR 10: added (with effect on 1 April 2008), on 6 October 2009, by section 294(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Subpart HZ—Terminating provisions HZ 1 Distributions from trusts of pre-1989 tax reserves (1) When this section applies This section applies if, and to the extent to which, a distribu- tion is received from a trust that is not a unit trust, a group investment fund, or a superannuation scheme, when the distri- bution— 1623 Part H s HZ 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (a) (b) consists of an amount of income or a capital gain de- rived by the trustee in the 1987–88 or earlier tax year; and is not also beneﬁciary income to which an entitlement exists in the tax year.
Treatment of distribution The distribution is not income, and the provisions of this Act and the Tax Administration Act 1994 that correspond to the provisions of the Income Tax Act 1976, the Income Tax Act 1994, the Income Tax Act 2004, and the Income Tax Amend- ment Act (No 5) 1988 speciﬁed in the proviso to section 9 of the Act last referred to, do not apply.
Deﬁned in this Act: beneﬁciary income, distribution, group investment fund, income, superannuation scheme, tax year, trustee, trustee income, unit trust Compare: 2004 No 35 s HZ 1 HZ 2 Trusts that may become complying trusts When this section applies This section applies in relation to a settlement made on a trust on or before 17 December 1987, whether or not further settle- ments have been made on the trust after that date, when a settlor, trustee, or beneﬁciary of the trust chose under section 228(7) of the Income Tax Act 1976 on or before 31 May 1989 to pay income tax on trustee income derived in the 1988–89 tax year and later tax years.
Trustee income derived in earlier tax years Trustee income that is derived from outside New Zealand, or derived from New Zealand only as non-resident passive in- come in relation to which the income tax obligations have been satisﬁed, in the 1987–88 tax year and earlier tax years when no trustee was resident in New Zealand is treated as liable to income tax, other than only as non-resident passive income.
Trustee’s obligations The trustee’s obligations in relation to their income tax liability on the trustee income are treated as having been satisﬁed.
Deﬁned in this Act: complying trust, derived from New Zealand, income tax, income tax liability, New Zealand, non-resident passive income, pay, resident in New Zealand, settlement, settlor, tax year, trustee, trustee income Compare: 2004 No 35 s HZ 2 (1) (2) (3) 1624 Reprinted as at 1 January 2010 Income Tax Act 2007 Part H s HZ 3 HZ 3 Special partnerships: transition into limited partnerships and limited partnerships deduction rules (1) (2) (3) (4) When this section applies This section applies when a special partnership under Part 2 of the Partnership Act 1908— (a) (b) is in existence on 1 April 2008; and is terminated and a limited partnership registered under the Limited Partnerships Act 2008 (the new limited partnership) succeeds to that special partnership.
No disposal: same partnership No partners’ interests are disposed of merely because of the termination and succession described in subsection (1)(b).

The partners of the special partnership are treated as the same partners of the new limited partnership.
Initial basis For the purposes of applying sections HG 11 and HG 12 (which relate to limited partnerships deduction rules) to the partners of the new limited partnership, all of the partners must choose one of the 2 following methods for calculating their partner’s basis under section HG 11(3): (a) they may choose to use the market value or the ac- counting book value of the amounts described in sec- tion HG 11(3), as at the day the calculation is ﬁrst per- formed, namely the last day of the ﬁrst income year in which they are subject to sections HG 11 and HG 12; or they may choose to apply section HG 11(3) as if the spe- cial partnership had always been a limited partnership and all relevant rules relating to limited partnerships had always existed (applying those rules with any necessary modiﬁcations).
(b) Initial basis not less than zero If the application of sections HG 11 and HG 12, as modiﬁed by this section, calculates a partner’s basis as less than zero, then the partner’s basis is treated as being zero.

Deﬁned in this Act: disposal limited partnership, partner, partner’s interests, partnership Section HZ 3: added, on 1 April 2008, by section 21(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
1625 Part H s HZ 4 Income Tax Act 2007 Reprinted as at 1 January 2010 HZ 4 Overseas limited partnerships: transition into limited partnerships deduction rules (1) (2) When this section applies This section applies when a limited partnership described in paragraphs (a) and (b) of the deﬁnition of limited part- nership (the overseas limited partnership) existed before 1 April 2008, and a partner of that partnership (a relevant partner) is a member of the partnership on 1 April 2008 and is subject to sections HG 11 and HG 12 (which relate to limited partnerships deduction rules) on or after 1 April 2008.
Initial basis For the purposes of applying sections HG 11 and HG 12 to the relevant partners of the overseas limited partnership, all relevant partners must choose one of the 2 following methods for calculating their partner’s basis under section HG 11: (a) they may choose to use the market value or the ac- counting book value of the amounts described in section HG 11, as at the day the calculation is ﬁrst performed, namely the last day of the ﬁrst income year in which they are subject to sections HG 11 and HG 12; or they may choose to apply section HG 11 as if the over- seas limited partnership had always been a limited part- nership and all relevant rules relating to limited partner- ships had always existed (applying those rules with any necessary modiﬁcations).
(b) (3) Initial basis not less than zero If the application of sections HG 11 and HG 12, as modiﬁed by this section, calculates a partner’s basis as less than zero, then the partner’s basis is treated as being zero.

Deﬁned in this Act: limited partnership, partner, partnership Section HZ 4: added, on 1 April 2008, by section 21(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
HZ 7 Saving of binding rulings relating to settlements on trusts When, and extent to which, this section applies This section applies when, and to the extent to which,— (a) before the commencement of the Taxation (Consequen- tial Rate Alignment and Remedial Matters) Act 2009— (1) 1626 Reprinted as at 1 January 2010 (i) (b) (c) Income Tax Act 2007 Part H s HZ 7 an applicant has applied for a binding ruling on an arrangement that is entered into, or that the applicant seriously contemplates will be entered into, before the commencement of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009: a binding ruling is issued; and (ii) the binding ruling is about a provision of the Income Tax Act 2004 on the question of whether an amount is a settlement on a trust; and the binding ruling— (i) is made before or after the commencement of this Act and continues to exist at the commencement of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009; and is made in relation to a provision of the Income Tax Act 2004 to which section ZA 4 (Saving of binding rulings) of this Act would have ap- plied but for the intended change listed in sched- ule 51 (Identiﬁed changes in legislation) for sec- tion HC 27(2) (Who is a settlor?
); and (ii) (d) in the absence of this section, the commencement of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 would mean that the binding ruling would cease to apply because of section 91G of the Tax Administration Act 1994.
Ruling about new law The binding ruling continues to exist despite the intended change referred to in subsection (1)(c)(ii) from the com- mencement of this Act to the date on which the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 receives the Royal assent.
No conﬁrmation rulings To the extent to which a binding ruling continued by subsec- tion (2) exists and applies to an arrangement, or to a person and an arrangement, the Commissioner must not make a binding ruling in the period that starts on the date of the commence- ment of this Act and ends on the date on which the Taxation (2) (3) 1627 Part I s IA 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (Consequential Rate Alignment and Remedial Matters) Act 2009 receives the Royal assent on how— (a) the new law applies to the arrangement or to the person and the arrangement; or this subsection applies to the arrangement or to the per- son and the arrangement.
(b) Deﬁned in this Act: arrangement, binding ruling, Commissioner, settlement Section HZ 7: added (with effect on 1 April 2008), on 7 December 2009, by section 53 of the Taxation (Consequential Rate Alignment and Remedial Mat- ters) Act 2009 (2009 No 63).
Part I Treatment of tax losses Subpart IA—General rules for tax losses IA 1 What this subpart does This subpart— (a) deﬁnes the relationship between the core provisions of this Act, the provisions of this Part, and other provisions in this Act that allow a person with a tax loss to use the amount of the loss; and establishes the general rules for using a tax loss.

(b) Deﬁned in this Act: amount, tax loss Compare: 2004 No 35 s IE 1(1)(a) IA 2 Tax losses What is a tax loss?
A person’s tax loss for a tax year is found by adding together the amounts referred to in subsections (2) to (4).

Loss balances carried forward If the person has a loss balance carried forward under section IA 3(4) to the tax year, the amount is included in their tax loss for the tax year to the extent to which it is not subtracted under section IA 4(1)(a) from their net income for the tax year.
Net losses If the person has a net loss under section BC 4 (Net income and net loss) for the tax year, the amount is a tax loss component included in their tax loss for the tax year.
(1) (2) (3) 1628 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IA 2 (4) Additional amounts If the person is described in 1 or more of the following para- graphs and has the amount described in the paragraph, the amount is included as a tax loss component in their tax loss for the tax year: (a) a member fund that incurs excess expenditure: (i) the amount that is included in the tax loss under section DV 5(4)(b) (Investment funds: transfer of expenditure to master funds); and the amount that the fund chooses under section DV 7(2) (Carry forward of expenditure) to treat as an amount added to the tax loss under this section: (ii) (b) (c) (d) (e) (f) (g) a person whose imputation credits are included in their annual gross income for the tax year: the amount of converted imputation credits arising under section LE 2 (Use of remaining credits by companies and trustees) for the tax year: a person who has an unallocated deduction for the pay- ment of a supplementary dividend in the corresponding income year: the amount referred to in section LP 10(3) (Limitation on deductions) for the tax year: a company (company A) if an Australian ICA com- pany has chosen under section OB 69(5) (Further in- come tax paid satisfying liability for income tax) to have a payment converted into a tax loss component of com- pany A: the amount calculated under section OB 69(7) for the tax year: a person who has an unused attributed controlled for- the eign company (CFC) net loss for the tax year: amount referred to in section
 IQ 2(3) (Ring-fencing cap on attributed CFC net losses) for the tax year: a person who has an unused foreign investment fund (FIF) net loss for the tax year: the amount referred to in section IQ 3(3) (Ring-fencing cap on FIF net losses) for the tax year: a person with a speciﬁed activity net loss for the tax year: the amount referred to in section IZ 1(1) (Use of speciﬁed activity net losses) for the tax year.
1629 Part I s IA 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (5) (6) (7) Ring-fenced amounts This section, and sections IA 3 and IA 4, do not apply to the amounts referred to in section IA 7, which are subject to par- ticular rules in other Parts or subparts that limit the way in which a person may use them.
Exclusion: net losses from schedular income [Repealed] [Repealed] Meaning of tax loss component For the purposes of this subpart, a tax loss component, for a tax year,— (a) means an amount included in a tax loss for the tax year (b) under subsection (3) or (4): includes— (i) an unused amount of a net loss or an amount treated as a net loss or as an available net loss of a person arising before the 2008–09 tax year which the person was entitled to have carried for- ward under section IE 1 (Net losses may be offset against future net income) of the Income Tax Act 2004 to that tax year: an amount included in a company’s loss balance at the end of the tax year to which sections IZ 4 to IZ 6 (which relate to tax losses for tax years before 1992) apply, or other amounts in relation to which modiﬁed continuity rules apply.
(ii) Deﬁned in this Act: amount, annual gross income, attributed CFC net loss, Australian ICA company, company, deduction, FIF net loss, imputation credit, income, loss balance, net income, net loss, pay, speciﬁed activity net loss, sup- plementary dividend, tax loss, tax loss component, tax year, trustee Compare: 2004 No 35 ss BC 4(4), DV 5(4)(b), DV 7(2), IE 1(1), (3)(a), IE 2(1), IE 3(5), IE 4(6), LB 2(3), (3A), LE 4(5), ME 9(5B) Section IA 2(2): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(1)(a) of the Taxation (Consequential Rate Alignment and Remed- ial Matters) Act 2009 (2009 No 63).
Section IA 2(2): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(1)(b) of the Taxation (Consequential Rate Alignment and Remed- ial Matters) Act 2009 (2009 No 63).

Section IA 2(4)(b): substituted (with effect on 1 April 2008), on 7 December 2009, by section 54(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
1630 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IA 2 Section IA 2(4)(c): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(3) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).

Section IA 2(4)(d): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(4) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section IA 2(4)(e): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(5) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).

Section IA 2(4)(f): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(5) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(4)(f): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(6) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IA 2(4)(g): amended (with effect on 1 April 2008), on 7 December 2009, by section 54(7) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section IA 2(6) heading: repealed (with effect on 1 April 2008), on 7 December 2009, pursuant to section 54(8) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IA 2(6): repealed (with effect on 1 April 2008), on 7 December 2009, by section 54(8) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2(7): substituted (with effect on 1 April 2008), on 7 December 2009, by section 54(9) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IA 2 list of deﬁned terms corresponding income year: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2 list of deﬁned terms schedular income: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Conse- quential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IA 2 list of deﬁned terms schedular income tax liability: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Tax- ation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 2 list of deﬁned terms trustee: added (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Align- ment and Remedial Matters) Act 2009 (2009 No 63).

1631 Part I s IA 3 Income Tax Act 2007 Reprinted as at 1 January 2010 IA 3 Using tax losses in tax year Paying shortfall penalties A person who has a tax loss for a tax year may use some or all of the amount of the tax loss under section IW 1 (Shortfall penalties) to pay a shortfall penalty.
(b) Companies using tax losses A company that has a tax loss for a tax year may— (a) make the amount available to another company under section IC 5 (Company B using company A’s tax loss) to subtract from the other company’s net income for the tax year; or use the amount under section RG 6 (Using loss bal- ances) to satisfy a liability for a foreign dividend pay- ment (FDP) payable in the corresponding income year; or use the amount under sections FM 26 to FM 28, or RM 21, (which relate to FDP) to obtain a refund of an overpayment of FDP made in the corresponding income year.
(c) Taxable distributions The amount of a tax loss for a tax year of a beneﬁciary of a non-complying trust may be used under section HC 22 (Use of tax losses to reduce taxable distributions from non-complying trusts) to adjust the amount of a taxable distribution derived in the corresponding income year.
Remaining loss balances carried forward If a person has a balance of tax loss remaining for a tax year after the uses described in this section, the balance is carried forward to the next tax year as a loss balance.

Relationship with other provisions in this subpart Sections IA 5, IA 8, and IA 10 override this section.
Deﬁned in this Act: amount, company, corresponding income year, FDP, for- eign dividend, loss balance, net income, non-complying trust, pay, shortfall penalty, tax loss, tax year, taxable distribution Compare: 2004 No 35 ss BC 4(4), HH 3(4), IE 1(1), (2), IG 10, NH 3(2), NH 4(5), (6), NH 5(6), (7) Section IA 3(5) heading: substituted (with effect on 1 April 2008), on 7 De- cember 2009, by section 55(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
(1) (2) (3) (4) (5) 1632 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IA 5 Section IA 3(5): amended (with effect on 1 April 2008), on 7 December 2009, by section 55(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IA 4 Using loss balances carried forward to tax year (1) (2) Priority uses A person’s loss balance carried forward under section IA 3(4) to a tax year, must— (a) ﬁrst, be subtracted from their net income, so far as it extends, for the tax year; and secondly, to the extent of a remaining loss balance car- ried forward under section IA 2(2), be included in their tax loss for the tax year.

(b) Relationship with other provisions in this subpart Sections IA 5 and IA 8 to IA 10 override this section.
Deﬁned in this Act: company, loss balance, net income, tax loss, tax year Compare: 2004 No 35 s IE 1(2) Section IA 4(1)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 56(1) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).

Section IA 4(2) heading: substituted (with effect on 1 April 2008), on 7 De- cember 2009, by section 56(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 4(2): substituted (with effect on 1 April 2008), on 7 December 2009, by section 56(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

IA 5 Restrictions on companies’ loss balances carried forward (1) (2) General statement A company’s tax loss component is carried forward in a loss balance only if the minimum continuity requirements of sub- sections (2) and (3) are met.
The tax loss component includes an unused tax loss component carried forward from an earlier income year.

Continuity of voting interests A tax loss component is carried forward in a loss balance under section IA 3(4) only if a group of persons holds for the con- tinuity period minimum voting interests in the company that add up to at least 49%.
1633 Part I s IA 5 Income Tax Act 2007 Reprinted as at 1 January 2010 Continuity of market value interests If a market value circumstance exists for the company at any time during the continuity period, the group of persons must also hold for the continuity period, minimum market value interests in the company that add up to at least 49%.
Breach of continuity of ownership in period If a tax loss component cannot be carried forward because the requirements of subsections (2) and (3) are not met, the com- pany may apply section IP 3 (Continuity breach: tax loss com- ponents of companies carried forward) to determine whether some or all of the tax loss component is carried forward in a loss balance.
Avoidance arrangements Section GB 3 (Arrangements for carrying forward loss bal- ances: companies) may apply to treat a company as not meet- ing the requirements of subsection (2) or (3).
Some deﬁnitions In this section,— continuity period means the period of time from the start of the income year that corresponds to the tax year in which a tax loss component is included in the tax loss to the end of the income year that corresponds to the tax year in which the company uses the tax loss component minimum market value interest, for a person and a continu- ity period, means the lowest market value interest they have in the company during the continuity period minimum voting interest, for a person and a continuity period, means the lowest voting interest they have in the company during the continuity period.
Deﬁned in this Act: company, continuity period, corresponding income year, group of persons, income year, loss balance, market value circumstance, market value interest, minimum market value interest, minimum voting interest, tax loss component, tax year, voting interest Compare: 2004 No 35 s IF 1(1) Section IA 5(1): substituted (with effect on 1 April 2008), on 7 December 2009, by section 57(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 5(4): substituted (with effect on 1 April 2008), on 7 December 2009, by section 57(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

(3) (4) (5) (6) 1634 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IA 7 Section IA 5(6) minimum market value interest: amended (with effect on 1 April 2008), on 7 December 2009, by section 57(3)(a) of the Taxation (Con- sequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 5(6) minimum voting interest: amended (with effect on 1 April 2008), on 7 December 2009, by section 57(3)(b) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IA 6 Restrictions on companies grouping tax losses (1) (2) (3) Groups of companies A company that is part of a group of companies may use under section IA 3(2) a tax loss under subpart IC (Grouping tax losses) only if it meets the requirements of section IC 5 (Com- pany B using company A’s tax loss).

Consolidated groups Subpart ID (Use of tax losses by consolidated groups) applies to the grouping of tax losses by a consolidated group of com- panies.
Avoidance arrangements Section GB 4 (Arrangements for grouping tax losses: com- panies) may apply to treat a company as not meeting the re- quirements referred to in subsection (1).

Deﬁned in this Act: company, consolidated group, group of companies, tax loss Compare: 2004 No 35 ss IG 1(1), GC 4 Section IA 6(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 58(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IA 7 Restrictions relating to ring-fenced tax losses (1) Non-application of sections IA 2 to IA 4 Sections IA 2 to IA 4 (the general rules) do not apply to an amount referred to in subsections (2) to (8).

Treatment as tax loss component (1B) For the purposes of the application of sections IA 5, IA 6, IA 9, and IA 10, a ring-fenced tax loss under this section is treated as if it were a tax loss component.
(2) Tax losses of LAQCs The general rules do not apply in relation to a loss-attributing qualifying company (LAQC) to an amount that would have been a loss balance carried forward under section IA 3(4) in 1635 Part I s IA 7 Income Tax Act 2007 Reprinted as at 1 January 2010 the absence of sections HA 21 and HA 24(5) (which relate to the treatment of losses by LAQCs).

The provisions that deal with these losses are sections HA 24 to HA 27.
Policyholder net losses The general rules do not apply to a life insurer’s policyholder net loss under section EY 43(10) (Policyholder income for- mula).

The provision that deals with this net loss is section IT 1 (Life insurers’ policyholder net losses).
Investment funds’ excess expenditure The general rules do not apply to excess expenditure of an investment fund under sections DV 5 and DV 7 (which relate to investment funds) except for— (a) the amount under section DV 5(4)(a) that the fund must treat as a tax loss component under section IA 2(4)(a)(i); and the amount under section DV 7(2) that the fund chooses to treat as a tax loss component under section IA 2(4)(a)(ii).
(b) Attributed CFC net losses The general rules do not apply to an attributed CFC net loss except a surplus under section IQ 2(3) (Ring-fencing cap on attributed CFC net losses).

The provisions that deal with this net loss, other than the surplus amount, are sections IQ 2, IQ 4, and IQ 6 to IQ 9 (which relate to foreign losses).

FIF net losses The general rules do not apply to a FIF net loss except a surplus amount under section IQ 3(3) (Ring-fencing cap on FIF net losses).
The provisions that deal with this net loss are sections IQ 3, IQ 5, and IQ 6 to IQ 9.

Mining net losses The general rules do not apply to a net loss of a mining com- pany, a resident mining operator, or a non-resident mining op- erator to the extent to which the net loss relates to a mining permit area.

The provisions that deal with these net losses are sections IS 1 to IS 4 and IS 6 (which relate to mining compan- ies’ tax losses).
(3) (4) (5) (6) (7) 1636 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IA 7 (8) (9) Petroleum net losses The general rules do not apply to a petroleum mining com- pany’s net loss to the extent to which the net loss relates to a permit area.

The provisions that deal with this net loss are sec- tions IS 5, IZ 2, and IZ 3 (which relate to petroleum mining companies’ use of loss balances).
Amounts remitted The general rules do not apply to an amount that an associ- ated person has remitted as a condition of a new start grant under section CX 48 (Amounts remitted as condition of new start grant) or EW 46 (Consideration when debtor released as condition of new start grant).
Net losses of portfolio tax rate entities (10) The general rules do not apply to a portfolio tax rate entity’s net loss that does not pay tax under section HL 23 (Payments of tax by portfolio tax rate entity choosing to pay provisional tax).
Deﬁned in this Act: amount, associated person, attributed CFC net loss, FIF net loss, LAQC, life insurer, loss-attributing qualifying company, loss balance, mining company, mining permit area, net loss, new start grant, non-resident mining operator, pay, permit area, petroleum mining company, policyholder net loss, portfolio tax rate entity, ring-fenced tax loss, resident mining operator, tax, tax loss component Compare: 2004 No 35 ss DV 5(4)(b), DV 7(2), EY 42(10), HG 16, IE 1(2BB), (2C), IE 3(5), IE 4(6), IG 4(4), IG 5(4), IG 7(2), (3), IH 1, IH 2(1), IH 3–IH 5, II 1(1), (2) Section IA 7(1B) heading: inserted (with effect on 1 April 2008), on 7 Decem- ber 2009, by section 59(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 7(1B): inserted (with effect on 1 April 2008), on 7 December 2009, by section 59(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IA 7(2): substituted (with effect on 1 April 2008), on 7 December 2009, by section 59(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 7(5): amended (with effect on 1 April 2008), on 6 October 2009, by section 296(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section IA 7(6): amended (with effect on 1 April 2008), on 7 December 2009, by section 59(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
1637 Part I s IA 8 Income Tax Act 2007 Reprinted as at 1 January 2010 Section IA 7(6): amended (with effect on 1 April 2008), on 6 October 2009, by section 296(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section IA 7 list of deﬁned terms loss balance: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IA 7 list of deﬁned terms ring-fenced tax loss: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Conse- quential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IA 8 Restrictions relating to schedular income Certain schedular income For the purposes of section BC 7 (Income tax liability of per- son with schedular income), a person must not take a tax loss into account in calculating a schedular income tax liability for a tax year for income described in the following paragraphs of the deﬁnition of schedular income: (a) (b) [Repealed] paragraph (f), for non-resident passive income de- scribed in section RB 3 (Schedular income tax liability for ﬁling taxpayers for non-resident passive income); or paragraph (g), which relates to non-resident shippers; or paragraph (h), which relates to non-resident ﬁlm renters; or paragraph (i), which relates to non-resident general in- surers.
(c) (d) (e) Grouping tax losses For the purposes of subsection (1), a company that is part of a group of companies must not take a tax loss of another com- pany in the same group into account under section IC 5 or ID 2 (which relate to companies’ use of tax losses) in calculating a schedular income tax liability for the tax year.

Relationship with sections IA 3 to IA 7 This section overrides sections IA 3 to IA 7.
Deﬁned in this Act: company, general insurance, group of companies, income, insurer, non-resident, non-resident entertainer, non-resident passive income, schedular income, schedular income tax liability, tax loss, tax year Compare: 2004 No 35 s ID 1(1) (1) (2) (3) 1638 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IA 10 Section IA 8(1)(a): repealed (with effect on 1 April 2008), on 6 October 2009, by section 297(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
IA 9 Ordering rules (1) (2) (3) Tax loss components Tax loss components that are included in a tax loss must be used in the order in which they arose.

Ring-fenced tax losses Ring-fenced tax losses must be used in the order in which they arose.
Losses in same tax year: consolidated groups and amalgamated companies For a consolidated group or on the amalgamation of compan- ies, tax loss components that the consolidated group or the companies have for the same tax year must be used in the order decided, as applicable, by the consolidated group or the amal- gamated company, who must also notify the Commissioner of the decision.

Without notiﬁcation, the amounts must be used on a pro rata basis.
Deﬁned in this Act: amalgamated company, amalgamation, amount, Commis- sioner, company, consolidated group, notify, ring-fenced tax loss, tax loss, tax loss component, tax year Compare: 2004 No 35 ss IE 1(3)(b), IF 5, IG 6(5) IA 10 Amended assessments (1) (2) When this section applies This section applies if, in a tax year, the Commissioner amends under section 113 of the Tax Administration Act 1994 a per- son’s assessment for an earlier tax year, and the amendment adjusts the amount of a tax loss component or a ring-fenced tax loss for the earlier tax year.
Reduced losses If the amount is reduced in the adjustment, the person must reduce their loss balance or ring-fenced tax loss for the earlier tax year by the amount of the adjustment.

If the loss balance or ring-fenced tax loss has been used in earlier tax years, they must similarly apply the reduction to the use of the loss balance or ring-fenced tax loss.
1639 Part I s IC 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Increased losses If the amount is increased in the adjustment, the person must add an amount to their loss balance or ring-fenced tax loss for the earlier tax year.
Deﬁned in this Act: amount, assessment, Commissioner, loss balance, ring- fenced tax loss, tax loss component, tax year Subpart IC—Grouping tax losses Introductory provisions IC 1 Company A making tax loss available to company B When this subpart applies This subpart applies if 1 company that is part of a group of companies (company A) has a tax loss for a tax year that it makes available to another group company (company B) to subtract from its net income for the tax year.
Requirements for grouping tax losses The amount of a tax loss that company A has for a tax year may be made available to company B to subtract from its net income for the tax year only if— (a) (b) the threshold levels in section IC 2 are met; and the companies meet all the requirements of section IC 5.
Losing continuity or commonality in tax year If company A or company B fail to meet 1 or both of the thresh- old levels referred to in subsection (2)(a), a tax loss may not be grouped unless section IP 4 or IP 5 (which relate to the group- ing of part-year losses) applies.

References to years In this subpart, a reference to a tax year of a company includes a reference to a non-standard accounting year of the company that corresponds with the tax year.
Relationship with sections IA 3 and IA 4 This section overrides sections IA 3 and IA 4 (which relate to the general use of tax losses).
Deﬁned in this Act: amount, company, group of companies, net income, non- standard accounting year, tax loss, tax year Compare: 2004 No 35 ss IG 1(1), (3), IG 2(1), (2)(c), (e) (1) (2) (3) (4) (5) 1640 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IC 3 IC 2 Threshold levels for grouping tax losses in tax year (1) (2) (3) Company A: continuity of ownership Company A may group a tax loss in a tax year under section IC 5 only if the requirements of section IA 5 (Restrictions on companies’ loss balances carried forward) are met.
Company A and company B: common ownership In addition to meeting the requirements referred to in subsec- tion (1), company A and company B must have the required common ownership under section IC 3 for the period referred to in section IC 6.
Part years: relationship with subpart IP Subpart IP (Meeting requirements for part-years) applies in a tax year that is part of the commonality period if the following requirements are met for the relevant part-year: (a) continuity of ownership in company A for the purposes of subsection (1); and common ownership of company A and company B for the purposes of subsection (2).
(b) Deﬁned in this Act: commonality period, company, tax loss, tax year Compare: 2004 No 35 ss IG 1(1), (3), IG 2(1), (2)(c), (e) IC 3 Common ownership: group of companies (1) (2) Meaning A group of companies means 2 or more companies, none of which is a portfolio tax rate entity, in relation to which a group of persons holds— (a) common voting interests that add up to at least 66%; and if a market value circumstance exists for a company that is part of a group of companies, common market value interests that add up to at least 66%.
(b) Part of group at time or for period A company is treated as part of a group of companies at a par- ticular time or for a particular period if the minimum common interests referred to in subsection (1) exist at the relevant time or are kept for the whole of the relevant period.

But it is not necessary that the group of persons holding the interests stays the same for the whole of the relevant period.
1641 Part I s IC 3 Income Tax Act 2007 Reprinted as at 1 January 2010 When portfolio tax rate entities included in group In relation to 2 or more companies of which 1 is a portfolio tax rate entity, the companies are treated as a group of companies at a particular time or for a particular period if— (a) the portfolio tax rate entity owns 100% of the voting interests in the other companies; and the other companies in the group are either portfolio tax rate entities or portfolio land companies.
(b) Measuring common voting interests In subsection (1)(a), if the percentage interests are the same for each company, a person’s common voting interest in the relevant companies at a particular time is the percentage of their voting interests under section YC 2 (Voting interests) in each of the companies at that time.

If the percentage interests in the companies differ, the percentage that counts is the lowest percentage voting interest in each of the companies for the period.
Measuring common market value interests In subsection (1)(b), if the percentage interests are the same for each company, a person’s common market value interest in the relevant companies at a particular time is the percentage of their market value interests under section YC 3 (Market value interests) in each of the companies at that time.

If the percentage interests in the companies differ, the percentage that counts is the lowest percentage market value interest in each of the companies for the period.
Deﬁned in this Act: common market value interest, common voting interest, company, group of companies, group of persons, market value circumstance, market value interest, portfolio land company, portfolio tax rate entity, voting interest Compare: 2004 No 35 s IG 1(2), (5) Section IC 3(2B) heading: inserted, on 1 April 2008, by section 432(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section IC 3(2B): inserted, on 1 April 2008, by section 432(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section IC 3(2B)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 298(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IC 3 list of deﬁned terms portfolio land company: inserted, on 1 April 2008, by section 432(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
(2B) (3) (4) 1642 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IC 5 IC 4 Common ownership: wholly-owned groups of companies (1) (2) Interests held A wholly-owned group of companies means 2 or more com- panies in relation to which a group of persons holds, for the relevant period,— (a) (b) common voting interests that add up to 100%; and if a market value circumstance exists for a company that is part of a group of companies, common market value interests that add up to 100%.
Employees’ share purchase schemes In subsection (1), company shares held by the trustee of, or by employees or former employees of the company as a conse- quence of the operation of, a share purchase scheme are disre- garded to the extent to which they represent voting interests in the company that add up to no more than 3%, or, as applicable, market value interests in the company that add up to no more than 3%.
Deﬁned in this Act: common market value interest, common voting interest, company, employee, group of companies, group of persons, market value cir- cumstance, market value interest, share, share purchase scheme, trustee, voting interest, wholly-owned group of companies Compare: 2004 No 35 s IG 1(3) Requirements and methods IC 5 Company B using company A’s tax loss (1) Requirements Company A may make a tax loss available to company B to subtract from its net income under section IA 3(2) (Using tax losses in tax year) only if— (a) company A and company B have minimum common ownership for the relevant period as set out in sections IC 2(2) and IC 6; and company A meets the residence requirements of section IC 7; and company A has the required continuity of ownership under section IC 2(1) and, if it applies, section IC 10(2)(a); and the amount falls within the limits set by section IC 8(1) and (2); and (b) (c) (d) 1643 Part I s IC 5 Income Tax Act 2007 Reprinted as at 1 January 2010 (e) the payment and notiﬁcation requirements of section IC 9 are met.
(2) (3) (4) (5) (6) (7) Method: election or subvention payment Having met all the requirements set out in subsection (1), com- pany A may— (a) choose to make a tax loss that it has in a tax year avail- able to company B to use in the tax year, notifying the Commissioner as described in section IC 9; or agree with company B that company B should bear the amount of company A’s tax loss, or take a share in it, in return for a payment by company B to company A by the date set out in section IC 9; or apply both paragraphs (a) and (b) in relation to the tax loss.
(b) (c) Amounts used in tax year Company B must subtract the amount of the tax loss referred to in subsection (2)(a) or the payment referred to in subsection (2)(b), as applicable, from its net income for the tax year in relation to which company A makes the amount available or receives the payment.

When decisions made If company A chooses to make the amount available to com- pany B under subsection (2)(a), the decision is irrevocable.
Nature of payment To the extent to which an amount of tax loss is subtracted from net income, a payment from company B to company A under subsection (2)(b) is not a dividend.

Part-year tax losses Sections IP 4 and IP 5 (which relate to losses in part-years) modify this section for part-year calculations.
Tax years before 1981–82 and between 1981–82 and 1991–92 section IZ 7 (Grouping tax losses for tax years before 1981–82 and between 1981–82 and 1991–92) modiﬁes the requirements of— (a) subsection (1)(a) for a tax loss component that arises in tax years between 1981–82 and 1991–92; and subsection (1)(b) for a tax loss component that arises in tax years before the 1991–92 tax year; and (b) 1644 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IC 7 (c) subsection (1)(a) for a tax loss component that arises in tax years before the 1981–82 tax year.
Deﬁned in this Act: amount, Commissioner, company, dividend, net income, notify, pay, tax loss, tax loss component, tax year Compare: 2004 No 35 s IG 2(2) IC 6 Common ownership for period (1) (2) (3) (4) Commonality period For the purposes of section IC 2(2), common ownership under section IC 3 must exist from the start of the income year in which company A has a tax loss component that is included in the tax loss to the end of the income year in which company B subtracts the amount of the tax loss component from its net income.
In this Part, this length of time is called the common- ality period.

Multiple net losses The requirement set out in subsection (1) applies to net losses as they arise in an income year on an individual basis.

When companies have different balance dates If the balance dates of company A and company B are dif- ferent, section IC 10(2)(b) applies to extend the commonality period.
Relationship with section IZ 7 section IZ 7(1) and (2) (Grouping tax losses for tax years before 1981–82 and between 1981–82 and 1991–92) overrides subsections (1) and (2).
Deﬁned in this Act: commonality period, company, income year, net income, tax loss, tax loss component Compare: 2004 No 35 ss IG 1(1), (2), IG 2(2)(c), (4)(d)(ii), (5)(c)(ii) IC 7 Residence of company A (1) Incorporation or carrying on business Company A, for the commonality period, must be either— (a) (b) incorporated in New Zealand; or carrying on a business in New Zealand through a ﬁxed establishment in New Zealand.
1645 Part I s IC 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Residence in New Zealand In addition to meeting the requirements of subsection (1), com- pany A, for the commonality period, must not be a company resident in New Zealand that is— (a) treated under a double tax agreement, and for the pur- poses of the agreement, as not resident in New Zealand; or liable by the law of another country or territory to in- come tax in that country or territory through domicile, residence, or place of incorporation.
(b) Relationship with section IZ 7 Section IZ 7(4) (Grouping tax losses for tax years before 1981–82 and between 1981–82 and 1991–92) overrides this section.
Deﬁned in this Act: business, commonality period, company, double tax agree- ment, ﬁxed establishment, income tax, New Zealand, resident in New Zealand Compare: 2004 No 35 s IG 2(2)(d), (11) IC 8 Limitations on amounts used Limit on amounts A tax loss made available, or a payment made, under section IC 5(2) must be no more than the amount that would be com- pany B’s net income for the tax year in which it subtracts the amount of the tax loss.
Limit for payments An amount that company B agrees to pay company A under section IC 5(2)(b) must be no more than the amount of com- pany A’s tax loss.

No accounting for amount by companies Company A and company B must ignore this section in calcu- lating their net incomes, but for the purposes of grouping tax losses, company B’s net income is found after taking into ac- count— (a) (b) ﬁrst, its own losses; and secondly, a tax loss made available to company B by another company.
Deﬁned in this Act: amount, company, loss, net income, pay, tax loss, tax year Compare: 2004 No 35 s IG 2(2)(f), (g) (1) (2) (3) 1646 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IC 10 IC 9 Date for payment and notice to Commissioner (1) (2) (3) Last date for payment A payment under section IC 5(2)(b) must be made no later than the extended return date, or by a later date if the Commissioner allows.
Date and method for notifying Commissioner Company A must notify the Commissioner of an election or payment under section IC 5(2) by the extended return date or, if applicable, the later date allowed by the Commissioner.

The notiﬁcation may be made in the company’s annual return of income.
Extended return date In subsections (1) and (2), extended return date means the 31 March that, for company A and the tax year in which the amount of the tax loss is subtracted, is the latest date to which the time for providing the return of income may be extended under section 37(5) of the Tax Administration Act 1994.
Deﬁned in this Act: amount, Commissioner, company, extended return date, notify, pay, return of income, tax loss, tax year Compare: 2004 No 35 s IG 2(2)(g), (3) IC 10 When companies have different balance dates (1) (2) When this section applies This section applies in a tax year when company A and com- pany B do not have the same balance date.
Extensions for continuity and common ownership If company B’s income year ends after the last day of company A’s income year, for section IC 5 to apply to a tax loss in a corresponding tax year,— (a) continuity of ownership in company A under section IC 2(1) must extend to the end of company B’s income year; and common ownership of company A and company B under section IC 3 or IC 4 must extend to the end of company B’s income year.
(b) 1647 Part I s IC 11 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Part-year tax losses This section applies for part-year calculations through section IP 2(2) (Group companies’ common span).
Deﬁned in this Act: company, income year, tax loss, tax year Compare: 2004 No 35 s IG 2(2)(c), (e) IC 11 Reduction of amounts used by companies When this section applies This section applies in a tax year if— (a) (b) company A has a tax loss for the tax year that is made available to, and subtracted by, more than 1 company that is part of the group of companies; and the Commissioner determines under section 113 of the Tax Administration Act 1994 that the actual total tax loss for the tax year is less than the sum of the amounts subtracted by the companies in the group, and notiﬁes company A.
Reduced amounts The relevant companies must reduce the amounts they sub- tracted either in the way company A allocates under subsection (3) or, if no allocation is made, proportionately under subsec- tion (4).

Company A’s allocation Company A may choose how the amount by which the total must be reduced is allocated between or among the companies.
But if company A allocates an amount to a company that is no longer part of the group at the time of the allocation, and the amount is more than a proportionate amount, the allocation is disregarded.

Subsection (6) sets out the notice requirements for this subsection.
Proportionate amounts If company A does not allocate the amounts by which the total must be reduced, the amounts subtracted by the group com- panies are reduced in the same proportion as that by which the total amount was reduced in determining the actual total tax loss.
(1) (2) (3) (4) 1648 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IC 12 (5) (6) Subvention payments If the reduction results in a payment under section IC 5(2)(b) being treated as a dividend, the dividend is reduced to the ex- tent to which the payment is repaid by company A within the notiﬁcation period referred to in subsection (6).
Notifying Commissioner For the purposes of subsections (3) and (5), company A must notify the Commissioner of the allocation within 6 months after the date on which the Commissioner notiﬁes company A that the reduction is required.

However, the Commissioner may agree to extend this notiﬁcation period.
Deﬁned in this Act: amount, Commissioner, company, dividend, group of com- panies, notify, tax loss, tax year Compare: 2004 No 35 s IG 2(7) IC 12 Bad debts or decline in value of shares (1) (2) (3) When this section applies This section applies to companies that are part of a group of companies in the tax year of deduction and in later tax years if— (a) a company other than company A in the group has a deduction under section DB 31 (Bad debts) for a bad debt or a decline in the value of shares; and the amount of the debt or the payment for the subscrip- tion of the shares has been taken into account in calcu- lating company A’s tax loss for a tax year; and the relevant tax year in which the deduction is made is the 1993–94 tax year or a later tax year.
(b) (c) No additions to loss balances The amount of the tax loss cannot be added to the loss balance, except to the extent to which the tax loss is more than the total amount of the deduction.
Determining decline in value of shares For the purposes of this section, shares are treated as declining in value if,— (a) on the disposal of the shares, the amount for which they were disposed of is less than the deduction for the cost of the shares; or 1649 Part I s IC 13 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) when the shares have not been disposed of, their value as calculated under subpart EB (Valuation of trading stock (including dealer’s livestock)) or otherwise de- clines.
Deﬁned in this Act: amount, company, deduction, group of companies, loss balance, pay, share, tax loss, tax year Compare: 2004 No 35 s IG 2(6) IC 13 Variation of requirements for development companies in Niue When this section applies This section applies in relation to the required common own- ership of group companies set out in sections IC 2(2), IC 3, and IC 5(1)(a) for the purposes of providing relief to company A for losses incurred in connection with development work in Niue.
Order in Council The Governor-General may make an Order in Council varying the threshold in section IC 3(1)(a) and (b) applying to company A if satisﬁed that the company— (a) is carrying on a business or enterprise that— (i) has been or is carried on wholly or mainly for the development of Niue: has been or is important to the development of Niue; and (ii) (b) has incurred expenditure wholly or mainly in deriving income from Niue or in the course of carrying on a busi- ness or enterprise in Niue for the purpose of deriving income.
Named company For the purposes of subsection (2), company A must be a com- pany named in the order.

Application of order The order may specify a period or periods to which it applies.

If no period is speciﬁed, the order applies to the whole com- monality period.
Deﬁned in this Act: business, commonality period, company, group of com- panies, income (1) (2) (3) (4) 1650 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s ID 2 Section IC 13: added (with effect on 1 April 2008), on 6 October 2009, by sec- tion 299 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Subpart ID—Use of tax losses by consolidated groups ID 1 Treatment of tax losses by consolidated groups (1) (2) Consolidated group’s net losses A tax loss of a consolidated group of companies is treated as the consolidated group’s tax loss, not the tax loss of a company that is part of the consolidated group.

Subparts IA and IC (which relate to the general use and grouping of tax losses), as modiﬁed by this subpart, apply as if the consolidated group were 1 company.
Ring-fenced tax losses Nothing in this subpart applies to a consolidated group whose companies are mining companies.
Deﬁned in this Act: company, consolidated group, mining company, tax loss Compare: 2004 No 35 s IG 6(1A)–(3) ID 2 Pre-consolidation losses: general treatment (1) (2) (3) When this section applies This section applies in a tax year when a company that meets the requirements of section IA 5 (Restrictions on companies’ loss balances carried forward) and is part of a consolidated group has a pre-consolidation loss balance carried forward to the tax year.
First use The ﬁrst use of the loss balance must be to make the amount of the loss balance available to the consolidated group to subtract from its net income, so far as it extends, for the tax year.
Second use If, after subsection (2) is applied, some of the loss balance re- mains, the company may choose to do 1 or more of the fol- lowing: (a) subtract the remaining amount from its net income for the tax year: 1651 Part I s ID 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) make the remaining amount available to another con- solidated group to subtract from its net income for the tax year: (c) make the remaining amount available under section IC 5 (Company B using company A’s tax loss).
Third use If, after subsections (2) and (3) are applied, a loss balance re- mains, the remaining amount is carried forward to the next tax year.

Relationship with sections IA 3, IA 4, IC 5, and provisions in this subpart This section overrides sections IA 3, IA 4, and IC 5 (which relate to the general use and grouping of tax losses).

Sections ID 3 to ID 5 override this section.
Deﬁned in this Act: amount, company, consolidated group, net income, loss balance, tax year Compare: 2004 No 35 s IG 6(4), (6), (7) (4) (5) ID 3 Pre-consolidation losses: use by group companies When this section applies This section applies in a tax year when— (a) (b) a company (company A) that is part of a consolidated group has a loss balance to which section ID 2 applies; and company A, in the continuity period relating to a tax loss component included in the loss balance, does not have the required common ownership under section IC 3 (Common ownership: group of companies) with 1 or more companies in the consolidated group.
Limit on amount available The amount made available under section ID 2(2) to the con- solidated group is limited as follows: including company A, in the if all the companies, (a) consolidated group meet the requirements of section IC 6(1) (Common ownership for period): the amount available is limited to the amount of the loss balance to the extent of the net income of the consolidated group for the tax year: (1) (2) 1652 Reprinted as at 1 January 2010 (b) Income Tax Act 2007 Part I s ID 4 if some of the companies in the consolidated group meet the requirements of section IC 6(1): the amount avail- able is limited to the total of— (i) the amount that company A could subtract from its net income for the tax year if it were not in the tax year part of a consolidated group; and the amount that could be made available under section IC 5 (Company B using company A’s tax loss) to the other group companies in the tax year, ignoring the consolidation of the companies and presuming all steps required under section IC 5 were taken in order for the section to apply.
(ii) (3) (4) Relationship with section FM 3 In subsection (2), the calculation of the consolidated group’s net income must be made in accordance with section FM 3 (Liability of consolidated groups and group companies).

Relationship with section ID 2 This section overrides section ID 2.
Deﬁned in this Act: amount, company, consolidated group, continuity period, group of companies, loss balance, net income, tax loss component, tax year Compare: 2004 No 35 s IG 6(6) Section ID 3(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 300(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ID 3 list of deﬁned terms tax loss component: inserted (with effect on 1 April 2008), on 6 October 2009, by section 300(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

ID 4 Pre-consolidation losses on entry: part-year rule (1) (2) When this section applies This section applies if a company that is part of a consolidated group has a loss balance to which section ID 2 applies in a tax year when the company joins the consolidated group.
Limit on amount available The amount of the loss balance to be made available to the consolidated group under section ID 2(2) is the lesser of the amount the company establishes in ﬁnancial statements under subsection (3), or the amount calculated using the formula in 1653 Part I s ID 4 Income Tax Act 2007 Reprinted as at 1 January 2010 subsection (4), but in either case, it must not be more than the limit set out in section ID 3(2).
Financial statements The company may establish the amount to be made available by providing the Commissioner, at the time of providing the consolidated group’s return of income, with adequate ﬁnancial statements that— (a) relate to the part of the tax year when the company was part of the consolidated group; and disclose the amount that would be the net income at- tributable to the part of the tax year when the company was part of the consolidated group, determined on a fair and reasonable basis of attribution.
(b) Formula The amount that may be made available under section ID 2(2) and referred to in subsection (2) is calculated using the for- mula— unused amount − (part-year net income + part-year net loss).
Deﬁnition of items in formula In the formula,— (a) (b) (c) unused amount is the loss balance carried forward from an earlier tax year or years that would be sub- tracted from the consolidated group’s net income for the tax year in the absence of ID 3 or this section: part-year net income is the company’s net income for the part of the tax year before the company joins the consolidated group: part-year net loss is the amount of a pre-consolidation tax loss that must be subtracted under section ID 2 from the net income of another consolidated group of which the company was part in the tax year before joining the consolidated group referred to in subsection (1).
Relationship with section ID 2 This section overrides section ID 2.
Deﬁned in this Act: amount, Commissioner, company, consolidated group, loss balance, net income, return of income, tax loss, tax year Compare: 2004 No 35 s IG 6(7) (3) (4) (5) (6) 1654 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IE 1 ID 5 Pre-consolidation losses on exit: part-year rule (1) (2) (3) (4) (5) When this section applies This section applies if a company that is part of a consolidated group has a loss balance to which section ID 2 applies in a tax year when the company leaves the consolidated group.
Limit on amount available In addition to the amount available under section IP 3(3) (Con- tinuity breach: tax loss components of companies carried for- ward) but subject to the limit in section ID 3(2), the amount of the company’s loss balance that is carried forward to the tax year must be no more than the consolidated group’s net income for the relevant part of the tax year.

For part-year calculations, seesubpart IP (Meeting requirements for part-years).
Financial statements The consolidated group must provide the Commissioner with adequate ﬁnancial statements that disclose the amount that would be the consolidated group’s net income for the relevant part of the tax year, determined on a fair and reasonable basis of attribution.

The statements must be ﬁled with the consoli- dated group’s return of income for the tax year.
Continuity requirements For the purposes of this section, the company must meet the threshold level set out in section IC 2(1) (Threshold levels for grouping tax losses in tax year) for the relevant part of the tax year.

Relationship with section ID 2 This section overrides section ID 2.
Deﬁned in this Act: amount, Commissioner, company, consolidated group, loss balance, net income, return of income, tax year Compare: 2004 No 35 s IG 6(8) Subpart IE—Treatment of tax losses on amalgamation of companies IE 1 When this subpart applies This subpart applies if, in an amalgamation,— 1655 Part I s IE 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) either the amalgamating company or the amalgamated company has, before the date of the amalgamation, a tax loss component or ring-fenced tax loss: a company that is part of a group of companies has a tax loss for the tax year of amalgamation that may be made available to the amalgamated company to subtract from its net income for the tax year.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, group of companies, net income, ring-fenced tax loss, tax loss, tax loss component, tax year Compare: 2004 No 35 ss IF 4–IF 6 IE 2 Treatment of tax losses by amalgamating company When this section applies This section applies if an amalgamating company that meets the requirements of section IA 5 (Restrictions on companies’ loss balances carried forward) ends its existence on a resident’s restricted amalgamation, and has a tax loss for a tax year that— has not, before the date of amalgamation, been used by (a) the company; and could be made available and subtracted from the amal- gamated company’s net income for the part of the tax year that ends with the date of amalgamation.
(b) Attributing losses to amalgamated company If the amalgamated company meets the requirements of sec- tion IE 5, the tax loss is attributed to the amalgamated com- pany.

The amalgamated company may, after the date of amal- gamation, subtract the amount of the tax loss from its net in- come for the tax year, or make it available to another company to subtract from its net income for the tax year.
Other amalgamating companies In subsection (1)(b), the amalgamated company includes a company that has amalgamated with the amalgamating com- pany before or during the tax year in which the amount is used.

The tax year referred to in that subsection means the tax year of the relevant company.

(1) (2) (3) 1656 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IE 3 (4) New companies Subsection (1)(b) does not apply if the amalgamated company is incorporated only on the amalgamation.
Deﬁned in this Act: amalgamated company, amalgamating company, amount, company, net income, resident’s restricted amalgamation, tax loss, tax year Compare: 2004 No 35 s IF 4 IE 3 Treatment of tax losses by amalgamated company (1) (2) (3) (4) When this section applies This section applies if an amalgamated company that meets the requirements of section IA 5 (Restrictions on companies’ loss balances carried forward) has a loss balance carried forward to the tax year in which the amalgamation takes place, and the loss balance— (a) has not, before the date of amalgamation, been used by the company; and could be made available under and subtracted by each amalgamating company from the net income attributable to the part of the relevant company’s tax year that ends with the date of amalgamation.
(b) Loss balances carried forward If the requirements of sections IA 5, IC 2, and IC 5 (which relate to the use and grouping of tax losses) are met, the amal- gamated company’s loss balance is carried forward to the tax year in which the amalgamation takes place or to a later tax year.
Attributed CFC net losses and FIF net losses For the purposes of subsection (1)(b), if the tax loss is an at- tributed controlled foreign company (CFC) net loss or a for- eign investment fund (FIF) net loss, it may be made available only to a wholly-owned group of companies.

Relationship with sections IA 3 and IA 4 This section overrides sections IA 3 and IA 4 (which relate to the general use of tax losses).
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, attributed CFC net loss, FIF net loss, loss balance, net income, tax loss, tax year, wholly-owned group of companies Compare: 2004 No 35 s IF 6 1657 Part I s IE 4 Income Tax Act 2007 Reprinted as at 1 January 2010 IE 4 Group companies’ treatment of tax losses on amalgamation (1) (2) When this section applies This section applies on an amalgamation if a company that is part of a group of companies— (a) meets the requirements of section IA 5 (Restrictions on companies’ loss balances carried forward); and has a tax loss for part of a tax year before the date of amalgamation; and (b) (c) may use the tax loss under section IC 5, IQ 4, or IQ 5 (which relate to a company’s use of another company’s loss, including foreign losses).
Use by amalgamated company The amount of the tax loss may be subtracted from the net income of the amalgamated company for the tax year only if both the company and the amalgamated company, and each company that before or during the amalgamation amalgamated with the amalgamated company, meet the requirements of sub- parts IA, IC, and IQ (which relate to the general loss rules and certain foreign losses) that allow companies to group tax losses.
Deﬁned in this Act: amalgamated company, amalgamation, amount, company, group of companies, net income, tax loss, tax year Compare: 2004 No 35 s IG 9 IE 5 Applying the continuity provisions when companies amalgamate The provisions of this Act apply as if the amalgamated com- pany did not exist separately before amalgamation, and was instead the amalgamating companies with the same holders of shares and options over shares, each with the same number and class of shares and options over shares, as they held in the amalgamating company, to determine whether a tax loss or loss balance,— (a) may be used or is carried forward under sections IA 3 and IA 4 (which relate to the general use of tax losses): (b) may be subtracted from the net income of another com- pany under section IC 5, IQ 4, or IQ 5 (which relate to 1658 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IP 1 (c) a company’s use of another company’s loss, including foreign losses): in the case of a group company, may be subtracted from the net income of the amalgamated company under sec- tion IC 5, IQ 4, or IQ 5.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, company, loss balance, net income, share, tax loss Compare: 2004 No 35 ss IF 4, IG 8, IG 9 Subpart IP—Meeting requirements for part-years Introductory provisions IP 1 When this subpart applies (1) (2) Breaches of continuity and commonality This subpart applies if either or both the following breaches occur: (a) when commonality of ownership required by section IC 5(1)(a) (Company B using company A’s tax loss) is not met during a tax year (a commonality breach): when continuity of ownership required by section IA 5(1) (Restrictions on companies’ loss balances carried forward) is broken during a tax year, or when a new or existing company joins a group of companies during a tax year (a continuity breach).
(b) Relationship with subparts IA, IC, and ID: part-year calculations The general rules for the treatment of tax losses in subparts IA, IC, and ID (which relate to the general use and grouping of tax losses) apply, as modiﬁed or overridden by the provisions of this subpart, to— (a) (b) a part-year tax loss as if it were a tax loss for a tax year: part-year net income as if it were net income for a tax year: the common span as if the period of time were a tax year.
(c) Deﬁned in this Act: common span, net income, tax loss, tax year Compare: 2004 No 35 s IG 2(4)(e), (f), (5)(e), (f) 1659 Part I s IP 2 Income Tax Act 2007 Reprinted as at 1 January 2010 Section IP 1(1)(a): substituted (with effect on 1 April 2009), on 6 October 2009, by section 301(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IP 1(1)(b): substituted (with effect on 1 April 2009), on 6 October 2009, by section 301(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

IP 2 Group companies’ common span (1) (2) (3) Common span In this subpart, the corresponding parts of company A’s income year and company B’s income year when the requirements for commonality of ownership under section IC 5(1)(a) (Company B using company A’s tax loss) are met is called the common span.
Common span when balance dates differ If the income years of company A and company B do not end on the same date, the common span is that part of company B’s income year or income years in which the requirements for commonality are met.

IC 10(2)(b) (When companies have different balance dates) may apply to extend the period.
Calculating group companies’ tax losses For the purposes of this subpart and the grouping of tax losses, the amount of a tax loss component is found after taking into account any amount of the tax loss component subtracted from the net income of any group company.
Deﬁned in this Act: amount, common span, company, income year, net income, tax loss, tax loss component Compare: 2004 No 35 s IG 2(2)(e), (4)(c), (d), (5)(b), (c) Tax loss components carried forward IP 3 Continuity breach: tax loss components of companies carried forward When this section applies This section applies for the purposes of section IA 4 (Using loss balances carried forward to tax year) if a breach occurs in the requirements for continuity of ownership of section IA 5 (Restrictions on companies’ loss balances carried forward) that enable a tax loss component included in a company’s loss balance to be carried forward to or from a tax year.
(1) 1660 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IP 3 (2) (3) (4) (5) Tax loss components for earlier income years Despite the breach, a tax loss component arising in an earlier income year is carried forward to a tax year (year A) to the extent to which— (a) the requirements for continuity of ownership would be met if the continuity period included only part of the income year of the company that corresponds to year A; and the company has net income for part of the correspond- ing income year; and the company provides the Commissioner with adequate ﬁnancial statements under section IP 6 calculating the amount of the company’s net income for the relevant part of the corresponding income year.
(b) (c) Limit on tax loss components carried forward to year A The total tax loss components carried forward under subsec- tion (2) must be no more than the amount calculated under sub- section (2)(b) and (c), although the amount may be increased if IP 5 applies.
Tax loss components of year of breach Despite the breach, a tax loss component is carried forward to the tax year (year B) from year A to the extent to which— (a) the requirements for continuity of ownership would be met if the continuity period included only part of the income year that corresponds to year A; and the company provides the Commissioner with adequate ﬁnancial statements under section IP 6 calculating the amount of the company’s net loss for the part of year A.
(b) Limit on tax loss components carried forward to year B The amount of the tax loss component carried forward under subsection (4) must be the least of— (a) (b) (c) the part-year net loss calculated under subsection (4)(b): if the company has net income for year A, zero: if the company has a net loss for year A, the company’s net loss for year A. Deﬁned in this Act: amount, Commissioner, company, continuity period, cor- responding income year, income year, loss balance, net income, net loss, tax loss component, tax year Compare: 2004 No 35 s IF 1(2), (3) 1661 Part I s IP 4 Income Tax Act 2007 Reprinted as at 1 January 2010 Grouping part-year tax losses IP 4 Breach in income year in which tax loss component arises When this section applies This section applies for the purposes of sections IA 6 and IC 5 (which relate to the use and grouping of tax losses) when company A has a tax loss component arising in an income year in which either the continuity or commonality requirements for grouping tax losses are breached.
Modiﬁed requirements The tax loss component is included in a tax loss that company A makes available under section IA 3(2) (Using tax losses in tax year) to company B only to the extent to which the follow- ing requirements, which modify those set out in section IC 5 (Company B using company A’s tax loss), are met: (a) (b) the tax loss component arises in the common span; and continuity of ownership in company A under section IC 2(1) (Threshold levels for grouping tax losses in tax year) applies from the beginning to the end of the com- mon span; and company A and company B provide the Commissioner with adequate ﬁnancial statements under section IP 6; and company A notiﬁes the Commissioner of the treatment of the tax loss under section IP 7.
(c) (d) Determining amounts For the purposes of determining the amount of tax loss that company A and company B may use, sections IC 5 and IC 8 (which relate to the treatment of tax losses by companies) apply as if the common span were a corresponding income year.
Deﬁned in this Act: amount, Commissioner, common span, company, corres- ponding income year, income year, net income, notify, tax loss, tax loss com- ponent Compare: 2004 No 35 s IG 2(4) (1) (2) (3) 1662 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IP 6 IP 5 Breach in tax year in which loss balance is grouped (1) (2) (3) When this section applies This section applies for the purposes of sections IA 6 and IC 5 (which relate to the use and grouping of tax losses) when company A has a loss balance carried forward to a tax year in which either the continuity or commonality requirements for grouping tax losses are breached.
Modiﬁed requirements The loss balance is included in a tax loss that company A makes available under section IA 3(2) (Using tax losses in tax year) to company B only to the extent to which the follow- ing requirements, which modify those set out in section IC 5 (Company B using company A’s tax loss), are met: (a) a tax loss component included in the loss balance arises in the common span; and continuity of ownership in company A under section IC 2(1) (Threshold levels for grouping tax losses in tax year) applies in the common span; and company B provides the Commissioner with adequate ﬁnancial statements under section IP 6; and company A notiﬁes the Commissioner of the treatment of the tax loss under section IP 7.
(b) (c) (d) Determining amounts For the purposes of determining the amount of the loss balance that company A and company B may use, sections IC 5 and IC 8 (which relate to the treatment of tax losses by companies) apply as if the common span were a tax year.
Deﬁned in this Act: amount, Commissioner, common span, company, loss bal- ance, notify, tax loss, tax loss component, tax year Compare: 2004 No 35 s IG 2(2)(b)–(f), (5) Statements and notices IP 6 Financial statements required (1) Financial statements required from company: section IP 3 For the purposes of this subpart, a company must provide the Commissioner with adequate ﬁnancial statements under sec- tion IP 3(2)(c) and (4)(b) relating to the continuity period.
1663 Part I s IP 7 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) (5) Financial statements required from company A: section IP 4 For the purposes of this subpart, company A must provide the Commissioner with adequate ﬁnancial statements under sec- tion IP 4(2)(c) relating to the common span, calculating the amount of the tax loss component, determined on a fair and reasonable basis of attribution.
Financial statements required from company B: sections IP 4 and IP 5 For the purposes of this subpart, company B must provide the Commissioner with adequate ﬁnancial statements under sec- tions IP 4(2)(c) and IP 5(2)(c) relating to the common span, calculating the amount of the net income in the common span, determined on a fair and reasonable basis of attribution.
Different balance dates For the purposes of subsections (2) and (3), if the balance dates of company A and company B differ, the common span is taken as the period of time in the tax year in which the tax loss or loss balance is used— (a) that includes, but is not limited to, all or part of the tax year in which company A is in the same group of companies as company B; and in which company A and company B are at all times part of the same group of companies; and in which company A meets the continuity requirements of section IC 2(1) (Threshold levels for grouping tax losses in tax year).
(b) (c) Applying provisions to part-year periods In preparing the ﬁnancial statements described in this section, the company must, to the extent possible, apply the provisions of this Act to the common span as if it were a tax year.
Deﬁned in this Act: amount, Commissioner, common span, company, continu- ity period, group of companies, loss balance, net income, notify, tax loss, tax loss component, tax year Compare: 2004 No 35 ss IF 1(2), (3), IG 2(4)(c), (d), (5)(c), (d), (10) IP 7 Notices required Notifying Commissioner In sections IP 4(2)(d) and IP 5(2)(d), company A must notify the Commissioner by its extended return date that it intends (1) 1664 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IQ 1 (2) to treat a tax loss or loss balance in the way described in the relevant section.
Meaning of extended return date In subsection (1), extended return date has the meaning set out in section IC 9 (Date for payment and notice to Com- missioner), and includes a later date allowed by the Commis- sioner.
Deﬁned in this Act: Commissioner, company, extended return date, loss bal- ance, notice, notify, pay, tax loss Compare: 2004 No 35 s IG 2(4), (5) Subpart IQ—Attributed controlled foreign company net losses and foreign investment fund net losses IQ 1 General treatment (1) (2) (3) (4) General statement The treatment of amounts of attributed controlled foreign com- pany (CFC) net loss and foreign investment fund (FIF) net loss is dealt with under sections IA 5, IA 9, and IA 10 (which relate to the continuity rules, the use of losses, and adjustments) and in 92 of the Tax Administration Act 1994, as modiﬁed by this subpart.
When net losses arise An attributed CFC net loss or a FIF net loss arises on the last day of the tax year in which the loss is attributed.

Treatment of net losses by consolidated groups If a consolidated group has an amount of attributed CFC net loss or FIF net loss, no part of the amount belongs to a com- pany that is part of the consolidated group.
Treatment of net losses on amalgamation The treatment of tax losses, including amounts of attributed CFC net loss and FIF net loss, on the amalgamation of com- panies is dealt with under subpart IE (Treatment of tax losses on amalgamation of companies) and the provisions of this sub- part do not apply.
Deﬁned in this Act: amalgamation, amount, attributed CFC net loss, company, consolidated group, FIF net loss, tax loss, tax year Compare: 2004 No 35 ss IE 3(1), IE 4(1), IF 3, IF 6, IG 4(1), IG 5(1), IG 7(1) 1665 Part I s IQ 1B Income Tax Act 2007 Reprinted as at 1 January 2010 Section IQ 1(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 60(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 1B Losses carried forward to tax year An attributed CFC net loss or a FIF net loss or both may be carried forward to a tax year.

Section IA 5 (Restrictions on companies’ loss balances carried forward) applies for the pur- poses of this subpart as if the net loss were a tax loss compo- nent.
Deﬁned in this Act: attributed CFC net loss, FIF net loss, tax loss component, tax year Section IQ 1B: inserted (with effect on 1 April 2008), on 7 December 2009, by section 61(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 2 Ring-fencing cap on attributed CFC net losses (1) (1B) Limit on amount If a person’s attributed CFC net loss is carried forward to a tax year, the maximum amount that they may subtract from their net income for the tax year must be no more than the total of— all attributed CFC income that they derive in the tax (a) year in relation to a CFC resident in the same country in which the CFC that had the loss was resident at the time the loss arose; and all FIF income calculated under the branch equivalent method that they derive in the tax year in relation to a FIF resident in the same country in which the CFC that had the loss was resident at the time the loss arose.
(b) Attributed CFC net losses from year after transition If a person’s attributed CFC net loss relates to an income year for which section IQ 2B applies to the person and is carried forward to the tax year, the amount used for the tax year in reducing the person’s net income is equal to the amount sub- tracted under subsection (1).
(1C) Attributed CFC net losses from income year before transition If a person’s attributed CFC net loss relates to an income year before section IQ 2B applies to the person and is carried for- 1666 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IQ 2 ward to a tax year in which section IQ 2B applies to the per- son,— (a) the amount available in the tax year for reducing the person’s net income is equal to the equivalent CFC loss under section IQ 2B: the amount of that attributed CFC net loss that is not available to the person after the tax year is equal to the converted BE loss under section IQ 2B.
(b) (2) (3) Income only once In subsection (1), the person may take into account an amount of attributed CFC income or FIF income only to the extent to which they have not accounted for it in— (a) calculating a deduction under sections DN 4 or DN 8 (which relate to ring-fencing caps); or establishing their entitlement to make the attributed CFC net loss carried forward available under sections IC 5 (Company B using company A’s tax loss) or IQ 4; or applying subsection (1) in relation to another attributed CFC net loss.
(b) (c) Treatment of excess If the person cannot use all of the maximum amount referred to in subsection (1) because there is insufﬁcient net income, the surplus is no longer available to them as a CFC net loss, but becomes a tax loss component under section IA 2(4) (Tax losses).
Deﬁned in this Act: amount, attributed CFC income, attributed CFC net loss, branch equivalent method, CFC, deduction, FIF, FIF income, net income, tax loss component, tax year Compare: 2004 No 35 s IE 3(2), (3), (5) Section IQ 2(1)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 62(1) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section IQ 2(1)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 62(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).

Section IQ 2(1B) heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 302(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1667 Part I s IQ 2B Income Tax Act 2007 Reprinted as at 1 January 2010 Section IQ 2(1B): inserted (with effect on 30 June 2009), on 6 October 2009, by section 302(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section IQ 2(1C) heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 302(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 2(1C): inserted (with effect on 30 June 2009), on 6 October 2009, by section 302(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section IQ 2(2)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 62(3) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section IQ 2(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 302(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section IQ 2 list of deﬁned terms tax loss: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 2B Attributed CFC net loss from tax year before ﬁrst affected year When this section applies This section applies when a person has an amount (the avail- able BE loss) of attributed CFC net loss, or FIF net loss cal- culated using the branch equivalent method, that— (a) relates to a tax year before the ﬁrst tax year for which this section applies to the person; and relates to a CFC or FIF that is resident in a country (the jurisdiction) in which the loss arose; and is carried forward to a tax year (the conversion year) in which this section applies to the person.
(b) (c) What this section does In this section, subsection (3) gives the person an option that available BE loss for a jurisdiction not be carried forward and subsections (4) to (7) give, for whichever of the 4 possible alternative situations is relevant for the person,— (a) the amount of the available BE loss (the converted BE loss) that is— (i) treated as being converted into an amount re- ferred to in paragraph (b) in the conversion year; and (1) (2) 1668 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IQ 2B (3) (4) (b) (ii) is not available to the person to be carried forward as available BE loss for a later tax year: the amount (the equivalent CFC loss) of attributed CFC net loss that, for the purposes of the rest of this subpart, is treated as arising on the last day of the conversion year.
Option: loss not carried forward A person may choose by giving a notice in a form and at a time acceptable to the Commissioner that the available BE loss for a jurisdiction not be carried forward under this section.
Person not resident group member: more jurisdictional BE income For a person who is not a resident group member and has jur- isdictional BE income for the conversion year that is greater than zero and greater than the person’s jurisdictional attributed income for the conversion year,— (a) the person’s converted BE loss in the conversion year is the lesser of— (i) the person’s jurisdictional BE income for the conversion year: the person’s available BE loss for the conversion year: (ii) (b) the person’s equivalent CFC loss is the lesser of— (i) the person’s jurisdictional attributed income for the conversion year: the amount calculated by dividing the person’s available BE loss for the conversion year by the person’s jurisdictional income ratio for the con- version year.
(ii) (5) Person not resident group member: more jurisdictional attributed income For a person who is not a resident group member and has jur- isdictional attributed income for the conversion year that is greater than or equal to zero and greater than or equal to the person’s jurisdictional BE income for the conversion year,— the person’s converted BE loss for the conversion year (a) is the lesser of— 1669 Part I s IQ 2B Income Tax Act 2007 Reprinted as at 1 January 2010 (i) (ii) the person’s available BE loss for the conversion year: the person’s jurisdictional attributed income for the conversion year: (b) the person’s equivalent CFC loss is equal to the person’s converted BE loss for the conversion year.
Resident group member: more jurisdictional BE income For a person who is a resident group member for a wholly- owned group of companies and has jurisdictional BE income for the conversion year that is greater than zero and greater than the person’s jurisdictional attributed income for the con- version year,— (a) the person’s converted BE loss for the conversion year is the lesser of— (i) (ii) the person’s available BE loss for the conversion year: the greater of the person’s jurisdictional BE in- come for the conversion year and the amount cal- culated by multiplying the group’s jurisdictional income ratio for the conversion year by the per- son’s jurisdictional attributed income for the con- version year: (b) the person’s equivalent CFC loss is the amount calcu- lated by dividing the person’s converted BE loss for the conversion year by the group’s jurisdictional income ra- tio for the conversion year.
Resident group member: more jurisdictional attributed income For a person who is a resident group member and has jurisdic- tional attributed income for the conversion year that is greater than or equal to zero and greater than or equal to the person’s jurisdictional BE income for the conversion year,— (a) the person’s converted BE loss for the conversion year is the lesser of— (i) the person’s available BE loss for the conversion year: the person’s jurisdictional attributed income for the conversion year multiplied by the group’s jur- isdictional income ratio for the conversion year: (ii) (6) (7) 1670 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IQ 2B (b) the person’s equivalent CFC loss is equal to the amount calculated by dividing the person’s converted BE loss for the conversion year by the group’s jurisdictional in- come ratio for the conversion year.
(8) (9) Election by person or group to ﬁx jurisdictional income ratio A person or wholly-owned group may choose under this sub- section by notice, in a form and at a time acceptable to the Commissioner, that the person or members of the group use a jurisdictional income ratio— (a) equal to the average of the jurisdictional income ratios for the person or group, under paragraph (b) of the def- inition in subsection (9), for 2 consecutive tax years— the (i) the beginning of beginning at or after 2010–11 tax year; and in each of which the person or group has jurisdic- tional BE income; and (ii) (b) for all tax years after the 2 tax years referred to in para- graph (a).
Some deﬁnitions For a person or wholly-owned group and a tax year for which the person or members of the wholly-owned group have an in- come interest in a CFC that is resident in a country or territory (the jurisdiction),— jurisdictional attributed income means,— (a) (ii) for a person and the tax year, the amount that is the greater of zero and the amount calculated by— (i) ﬁnding, for each CFC resident in the jurisdiction, the attributed CFC income or loss of the person from the CFC for the tax year: ﬁnding, for each FIF resident in the jurisdiction for which the person uses the branch equivalent method, the FIF income or loss of the person from the FIF for the tax year: subtracting the total of loss amounts under sub- paragraphs (i) and (ii) from the total of income amounts under subparagraphs (i) and (ii): for a wholly-owned group and the tax year, the amount that is the greater of zero and the attributed CFC income or loss and FIF income or loss, treating losses as nega- (iii) (b) 1671 Part I s IQ 2B Income Tax Act 2007 Reprinted as at 1 January 2010 tive, of members of the group who are New Zealand residents from CFCs and FIFs that are resident in the jurisdiction for the tax year, consolidated for the pur- poses of the ﬁnancial statements of the group jurisdictional BE income means,— (a) (ii) for a person and the tax year, the amount that is the greater of zero and the amount calculated by— (i) multiplying, for each CFC resident in the juris- diction, the person’s income interest in the CFC for the tax
 year by the branch equivalent income or loss of the CFC for the tax year or, if the per- son chooses, by the amount given by subsection (10) for the CFC for the tax year: ﬁnding, for each FIF resident in the jurisdiction for which the person uses the branch equivalent method, the FIF income or loss of the person from the FIF for the tax year: subtracting the total of loss amounts under sub- paragraphs (i) and (ii) from the total of income amounts under subparagraphs (i) and (ii): for a wholly-owned group and
 the tax year, the amount that is the greater of zero and the amount calculated, treating losses as negative, by— (i) (iii) multiplying, for each CFC resident in the juris- diction, the income interest in the CFC of mem- bers of the group who are New Zealand residents for the tax year by the branch equivalent income or loss of the CFC for the tax year or, if the group chooses, by the amount given by subsection (10) for the CFC for the tax year: consolidating the results for the purposes of the ﬁnancial statements of the group (ii) (b) jurisdictional income ratio,— (a) for a person that has not made an election under subsec- tion (8), means the greater of 1 and the amount calcu- lated by dividing the person’s jurisdictional BE income for the tax year by the person’s jurisdictional attributed income for the tax year: 1672 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IQ 2B (b) (c) for a wholly-owned group that has not made an election under subsection (8) for the tax year, means the greater of 1 and the amount calculated by dividing the group’s jurisdictional BE income for the tax year by the group’s jurisdictional attributed income for the tax year: for a person or wholly-owned group that has made an election under subsection (8) for the tax year, means the amount given by subsection (8) for the person or group and the tax year resident group member means a person who is a member of a wholly-owned group that has other New Zealand residents as members.
(10) Option to determine jurisdictional BE income from accounts In determining the jurisdictional BE income of a person or wholly-owned group, the person or group may choose to use, instead of the branch equivalent income or loss of a CFC, the proﬁt or loss of the CFC before taxation given by accounts— complying with generally accepted accounting practice (a) in New Zealand or an equivalent standard for the consis- tent and undistorted reporting of net proﬁts in the coun- try in which the accounts are prepared; and audited by an accountant who is— (i) (b) a chartered accountant or an accountant of equivalent professional standard in the country in which the accounts are prepared; and independent of the CFC and the person or wholly-owned group; and (ii) (c) are given an unqualiﬁed opinion or an opinion of equivalent standard in the country in which the ac- counts are prepared.
Deﬁned in this Act: attributed CFC income, attributed CFC loss, branch equiva- lent income, branch equivalent loss, CFC, group of companies, income inter- est, jurisdictional attributed income, jurisdictional BE income, jurisdictional in- come ratio, New Zealand resident, resident group member, tax year, wholly- owned group, wholly-owned group of companies Section IQ 2B: inserted (with effect on 30 June 2009), on 6 October 2009, by section 303(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
1673 Part I s IQ 3 Income Tax Act 2007 Reprinted as at 1 January 2010 IQ 3 Ring-fencing cap on FIF net losses Limit on amount: branch equivalent method If a person’s FIF net loss is carried forward to a tax year, and they have calculated the amount of FIF net loss under the branch equivalent method, the maximum amount that they may subtract from their net income for the tax year must be no more than— (a) all attributed CFC income that they derive in the tax year in relation to a CFC resident in the same country in which the CFC that had the loss was resident at the time the loss arose; and all FIF income calculated under the branch equivalent method that they derive in the tax year in relation to a CFC resident in the same country in which the CFC that had the loss was resident at the time the loss arose.
(b) Relationship with section CQ 5 Despite this section, if the person’s FIF net loss is carried for- ward to a tax year and section CQ 5(1)(d) or (e) (When FIF in- come arises) applies, they may subtract the amount from their net income for the tax year, but only to the extent to which the amount is no more than their assessable income from interests that would be interests in a FIF for the tax year in the absence of that section.
Treatment of excess If the person cannot use all of the maximum amount referred to in subsection (1) because there is insufﬁcient net income, the surplus is no longer available to them as a FIF net loss, but becomes a tax loss component under section IA 2(4) (Tax losses).
Deﬁned in this Act: amount, assessable income, attributed CFC income, branch equivalent method, CFC, deduction, FIF, FIF income, FIF net loss, net income, tax year Compare: 2004 No 35 s IE 4(2)–(6) Section IQ 3(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 304(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 3(1)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 63(1) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).

(1) (2) (3) 1674 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IQ 4 Section IQ 3(1)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 63(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section IQ 3(3) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 304(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section IQ 3(3): added (with effect on 1 April 2008), on 6 October 2009, by section 304(2) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section IQ 3 list of deﬁned terms attributed CFC income: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 304(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section IQ 3 list of deﬁned terms CFC: inserted (with effect on 1 April 2008), on 6 October 2009, by section 304(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
IQ 4 Group companies using attributed CFC net losses (1) (2) (3) What this section does This section supplements the general rules relating to the grouping of net losses when— (a) a company that is part of a group of companies (com- pany A) has an attributed CFC net loss for a tax year or has an amount of attributed CFC net loss carried for- ward under section IQ 1B; and company A is not able to use the amount under section IQ 2.
(b) General loss rules modiﬁed If the group of companies is a wholly-owned group of com- panies, subpart IC (Grouping tax losses) and section GB 4 (Ar- rangements for grouping tax losses: companies) apply to the attributed CFC net loss, and the part-year grouping rules in subpart IP (Meeting requirements for part-years) do not apply.
Ring-fencing cap rule modiﬁed If company A cannot use the maximum amount referred to in section IQ 2 before the excess is converted into a tax loss component under section IQ 2(3), company A may use the amount in the following way: (a) the amount of the attributed CFC net loss together with any amount carried forward that company A may make available to another group company (company B) in 1675 Part I s IQ 4 Income Tax Act 2007 Reprinted as at 1 January 2010 the tax year may not be greater than the amount that company B would require as attributed CFC net loss from the same income year or income years to produce a reduction in company B’s net income for the tax year equal to the total of— (i) the amount of attributed CFC income that com- pany B derives in the tax year from a CFC resi- dent in the country in which the loss arose; and the amount of FIF income calculated under the branch equivalent method that company B de- rives in the tax year from a FIF resident in the country in which the loss arose: (ii) (b) (c) the amount of company B’s attributed CFC income or FIF income may be taken into account only to the extent to which it has not been accounted for— (i) in calculating a deduction of company B under section DN 4 or DN 8 (which relate to ring-fenc- ing caps on deductions); or in establishing company B’s entitlement to use an attributed CFC net loss under section IC 5 (Company B using company A’s tax loss) or this section: (ii) if company A cannot use some of the amount referred to in paragraph (a) in the tax year because company B’s net income is insufﬁcient, the surplus is no longer avail- able to company A as an attributed CFC net loss, but becomes, for company B, a tax loss component under section IA 2(4) (Tax losses).
Deﬁned in this Act: amount, attributed CFC income, attributed CFC net loss, branch equivalent method, CFC, company, deduction, FIF, FIF income, group of companies, net income, net loss, tax loss component, tax year, wholly-owned group of companies Compare: 2004 No 35 s IG 4 Section IQ 4(1)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 64(1) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section IQ 4(1)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 64(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).

Section IQ 4(2): amended (with effect on 1 April 2008), on 7 December 2009, by section 64(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
1676 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IQ 5 Section IQ 4(3): amended (with effect on 1 April 2008), on 7 December 2009, by section 64(4)(a) of the Taxation (Consequential Rate Alignment and Remed- ial Matters) Act 2009 (2009 No 63).

Section IQ 4(3)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 64(4)(b) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 4(3)(a): amended (with effect on 30 June 2009), on 6 October 2009, by section 305(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section IQ 4(3)(b)(ii): amended (with effect on 1 April 2008), on 7 December 2009, by section 64(4)(c) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 4 list of deﬁned terms tax loss: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 5 Group companies using FIF net losses (1) (2) (3) What this section does This section supplements the rules relating to grouping of tax losses when— (a) a company that is part of a group of companies (com- pany A) has a FIF net loss for a tax year, or has an amount of FIF net loss carried forward to a tax year; and company A is not able to use the amount under section IC 5 (Company B using company A’s tax loss).
(b) General loss rules modiﬁed If the group of companies is a wholly-owned group of com- panies, subpart IC (Grouping tax losses) and section GB 4 (Ar- rangements for grouping tax losses: companies) apply to the FIF net loss.
Ring-fencing cap rule modiﬁed Section IQ 3 applies to the FIF net loss, but is modiﬁed as follows: (a) if the FIF net loss is calculated under the branch equiva- lent method, the maximum amount that may be made available in the tax year must be no more than— (i) all attributed CFC income that another group company derives in the tax year in relation to a CFC resident in the country in which the loss arose; and 1677 Part I s IQ 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (ii) all FIF income calculated under the branch equivalent method that another group company derives in the tax year in relation to a FIF resi- dent in the country in which the loss arose.
if company A cannot use some of the amount referred to in paragraph (a) in the tax year because company B’s net income is insufﬁcient, the surplus is no longer available to company A as a FIF net loss, but becomes, for company B, a tax loss component under section IA 2(4) (Tax losses).
Deﬁned in this Act: amount, attributed CFC income, branch equivalent method, CFC, company, deduction, FIF, FIF income, FIF net loss, group of companies, net income, tax loss, tax loss component, tax year, wholly-owned group of com- panies Compare: 2004 No 35 s IG 5 Section IQ 5(3)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 306(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section IQ 5 list of deﬁned terms attributed CFC income: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 306(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section IQ 5 list of deﬁned terms CFC: inserted (with effect on 1 April 2008), on 6 October 2009, by section 306(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
IQ 6 Pre-consolidation losses: general treatment When this section applies This section applies if a company that is part of a consolidated group has under section IQ 1B an attributed CFC net loss or FIF net loss carried forward to a tax year.

First use The ﬁrst use of the amount must be by the company under subsection (3) or (4) in making the amount available to the consolidated group to subtract from its net income, so far as it extends, for the tax year.
CFC net losses If the amount is an attributed CFC net loss, it may be used only to the extent to which it is no more than the attributed CFC income that the consolidated group derives in the tax year from a CFC resident in the country in which the loss arose.
(1) (2) (3) 1678 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IQ 7 (4) (5) FIF net losses If the amount is a FIF net loss, it may be used only to the extent to which it is no more than the FIF income that the consolidated group derives in the tax year from a FIF resident in the country in which the loss arose.
Second use If, after applying subsection (2), some of the amount remains, the company may— (a) subtract the remaining amount from its net income for the tax year; or (b) make the remaining amount available to another con- solidated group to subtract from its net income for the tax year under section IQ 4 or IQ 5; or (c) make the remaining amount available under section IC 5 (Company B using company A’s tax loss).
Deﬁned in this Act: amount, attributed CFC income, attributed CFC net loss, CFC, company, consolidated group, FIF, FIF income, FIF net loss, net income, tax year Compare: 2004 No 35 s IG 7(2) Section IQ 6(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 65(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 7 When group membership lacking in loss period (1) When this section applies This section applies if— (a) a company that is part of a consolidated group has a ring-fenced tax loss consisting of either an attributed CFC net loss or FIF net loss, or both, that is carried forward to a tax year and must be used under section IQ 6; and the company was not part of the consolidated group in the earlier tax year in which the net loss arose; and the company and 1 or more of the companies in the consolidated group do not meet the requirements for common ownership of section IC 5(1)(a) (Company B using company A’s tax loss) for the loss period.
(b) (c) 1679 Part I s IQ 7 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) Limit on amount The amount that may be subtracted from the net income of the consolidated group in the tax year under section ID 2(2) must be no more than the total of— (a) the amount of ring-fenced tax loss referred to in sub- section (1) that the company could use to reduce its net income in the tax year under IQ 2 or IQ 3 as applicable, if it were not in the tax year part of a consolidated group; and the amount of ring-fenced tax loss referred to in subsec- tion (1) that the company could group with other com- panies in the group under section IQ 4 or IQ 5, as ap- plicable, determining— (i) the net income for each of the companies using the group’s calculation of each company’s net income; and the maximum amount of tax loss to be made available, ignoring the consolidation of the com- panies and presuming all steps required under those sections were taken in order for them to apply.
(ii) Relationship with section FM 3 In subsection (2), the amount of net income must be calculated in accordance with section FM 3 (Liability of consolidated groups and group companies).

Meaning of loss period In this section, the loss period means the tax year in which the ring-fenced tax loss arose and any tax years falling between that tax year and the tax year in which the amount is subtracted from net income.
Deﬁned in this Act: amount, attributed CFC net loss, company, consolidated group, FIF net loss, loss period, net income, ring-fenced tax loss, tax loss, tax year Compare: 2004 No 35 s IG 7(4) Section IQ 7(1)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(1)(a) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(1)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(1)(b) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

(2) (3) (4) 1680 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IQ 8 Section IQ 7(2)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(a)(i) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(2)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(a)(ii) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IQ 7(2)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(b)(i) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 7(2)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 66(2)(b)(ii) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IQ 8 When group membership lacking in tax year of use (1) (2) When this section applies This section applies if a company joins a consolidated group in a tax year with a ring-fenced tax loss consisting of an attributed CFC net loss or FIF net loss, or both, carried forward to the tax year, which must be used in the tax year under section IQ 6.
Limit on amount The amount that may be subtracted from the net income of the consolidated group for the tax year under section ID 2(2) is the lesser of— (a) the amount of ring-fenced tax loss referred to in section IQ 7(1) that the company could subtract from— (i) the amount that would be the company’s net in- come for the part of the tax year in which it was not part of a consolidated group; and the net income for the tax year of another con- solidated group of which the company was part before joining the present group; and (ii) (b) the amount that would be the group’s net income for the part of the tax year in which the company was part of the consolidated group, established by giving the Com- missioner, at the time of providing the group’s return of income for the tax year, adequate ﬁnancial statements that— (i) relate to the part of the tax year when the com- pany was part of the group; and disclose the amount that would be the company’s net income for the part of the tax year in which (ii) 1681 Part I s IQ 9 Income Tax Act 2007 Reprinted as at 1 January 2010 the company was part of the consolidated group, determined on a fair and reasonable basis of at- tribution.
Deﬁned in this Act: amount, attributed CFC net loss, Commissioner, company, consolidated group, FIF net loss, net income, return of income, ring-fenced tax loss, tax year Compare: 2004 No 35 s IG 7(5) Section IQ 8(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 67(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IQ 8(2)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 67(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).

IQ 9 When attributed CFC net loss becomes FIF net loss (1) (2) (3) When this section applies This section applies if, in a tax year, a person has an attributed CFC net loss that, under section 38 of the Income Tax Amend- ment Act (No 2) 1993, becomes a FIF net loss.
Treatment of net losses The attributed CFC net loss is treated as a FIF net loss of the person with effect from the tax year, as if the CFC were a FIF.

Calculation methods For the purposes of subsection (2) and the calculation of the amount of the loss, the branch equivalent method is not used unless the person calculates their FIF income or net loss under the branch equivalent method in relation to the interest on the date of the transition from an attributed CFC net loss to a FIF net loss.
Deﬁned in this Act: amount, attributed CFC net loss, branch equivalent method, CFC, FIF, FIF income, FIF net loss, tax year Compare: 2004 No 35 s IE 3(4) Subpart IS—Mining companies’ and petroleum miners’ tax losses IS 1 General treatment of mining companies’ net losses Groups of companies In a tax year in which a company is a mining company, section IC 5 (Company B using company A’s tax loss) does not apply, (1) 1682 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IS 2 (2) (3) and the company is not included in a group of companies for the purposes of the section.
Consolidated groups A net mining loss of a mining company that is part of a con- solidated group is dealt with under this subpart and not subpart ID (Use of tax losses by consolidated groups).

Meaning of net mining loss For the purposes of this subpart, a net mining loss means that part of a net loss of a mining company, a resident mining oper- ator, or a non-resident mining operator that is described in sec- tion IA 7(7) (Restrictions relating to ring-fenced tax losses).
Deﬁned in this Act: company, consolidated group, group of companies, mining company, net mining loss, tax year Compare: 2004 No 35 ss IG 6(2), IH 4(2) Section IS 1 heading: substituted (with effect on 1 April 2008), on 7 Decem- ber 2009, by section 68(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 1(2): amended (with effect on 1 April 2008), on 7 December 2009, by section 68(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IS 1(3) heading: added (with effect on 1 April 2008), on 7 December 2009, by section 68(3) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section IS 1(3): added (with effect on 1 April 2008), on 7 December 2009, by section 68(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IS 1 list of deﬁned terms net mining loss: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Conse- quential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 1 list of deﬁned terms tax loss: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IS 2 Treatment of net losses resulting from certain expenditure (1) When this section applies This section applies if a company that is a mining company, or a resident mining operator, or a non-resident mining oper- ator— (a) has a net mining loss for a tax year as a result of incur- ring mining exploration expenditure or mining develop- ment expenditure in a mining permit area; and 1683 Part I s IS 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) has an amount of net mining loss carried forward to a later tax year.
Using loss balances The company may subtract the amount of the net mining loss from its net income for the later tax year, even though the con- tinuity of ownership required under section IA 5 (Restrictions on companies’ loss balances carried forward) is broken or is treated as absent under section GB 3 (Arrangements for carry- ing forward loss balances: companies), but only to the extent set out in subsection (3).
Limit on amount The amount subtracted under subsection (2) must be no more than the amount that would be the mining company’s net in- come if its only assessable income for the later tax year were from the mining permit area.

Amounts carried forward If the company cannot use all the net mining loss in the later tax year, the amount is carried forward to later tax years and subsection (2) applies to the remaining balance.
Use against other income The company may subtract the amount of the net mining loss from its net income that is not attributable to the mining per- mit area but only after meeting for the whole of the continu- ity period the requirements set out in sections GB 3 (Arrange- ments for carrying forward loss balances: companies) and IA 5 (Restrictions on companies’ loss balances carried forward).

For the purposes of applying section IA 5, the net mining loss is treated as if it were a tax loss component.
Deﬁned in this Act: amount, assessable income, company, mining company, mining development expenditure, mining exploration expenditure, mining per- mit area, net income, net mining loss, non-resident mining operator, resident mining operator, tax loss component, tax year Compare: 2004 No 35 ss IH 1(1), IH 5 Section IS 2 heading: substituted (with effect on 1 April 2008), on 7 Decem- ber 2009, by section 69(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2(1)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 69(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

(2) (3) (4) (5) 1684 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IS 3 Section IS 2(1)(b): amended (with effect on 1 April 2008), on 7 December 2009, by section 69(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2(2): amended (with effect on 1 April 2008), on 7 December 2009, by section 69(4) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IS 2(4): amended (with effect on 1 April 2008), on 7 December 2009, by section 69(5) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2(5) heading: added (with effect on 1 April 2008), on 7 December 2009, by section 69(6) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).

Section IS 2(5): added (with effect on 1 April 2008), on 7 December 2009, by section 69(6) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2 list of deﬁned terms loss balance: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

inserted (with effect on Section IS 2 list of deﬁned terms net mining loss: 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Conse- quential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 2 list of deﬁned terms tax loss: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IS 2 list of deﬁned terms tax loss component: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Conse- quential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IS 3 Holding companies’ tax losses (1) When this section applies This section applies in a tax year if— (a) (b) (c) a mining company has net income for the tax year after having subtracted an amount of any net mining loss that is carried forward; and the company and a holding company, which is not a mining company, would be included in a wholly-owned group of companies in the absence of section IS 1(1); and the holding company has a tax loss for the tax year that it cannot make available under section IC 5 (Company B using company A’s tax loss) to another company that is part of the wholly-owned group.
1685 Part I s IS 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) Using tax losses The mining company may subtract some or all of the amount of the holding company’s tax loss from its net income, so far as it extends, for the tax year.
Determining amounts The amount of the holding company’s tax loss is found without taking into account a deduction that the holding company may have under section DU 12 (Amount written off by holding company) for an amount written off a loan from the holding company to the mining company.

Relationship with section IS 1 This section overrides section IS 1(1).
Deﬁned in this Act: amount, deduction, holding company, loan, mining com- pany, net income, net mining loss, tax loss, tax year, wholly-owned group of companies Compare: 2004 No 35 s IH 4(3) Section IS 3(1)(a): amended (with effect on 1 April 2008), on 7 December 2009, by section 70(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IS 3 list of deﬁned terms loss balance: repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IS 3 list of deﬁned terms net mining loss: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Conse- quential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IS 4 Adjustments in certain circumstances When this section applies This section applies if, under section IS 3, the amount of a holding company’s tax loss for a tax year is subtracted from a mining company’s net income for the tax year instead of being carried forward to a later tax year.
Adjustments by Commissioner If the holding company applies for an adjustment and the Com- missioner agrees, the Commissioner may adjust the returns of income of the mining company and the holding company to reﬂect what is fair in the circumstances.

This subsection ap- plies in the tax year in which the holding company has the tax loss referred to in subsection (1), and to any of the 8 tax years following that tax year.
(1) (2) 1686 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IS 5 (3) Time for applying to Commissioner The holding company must apply within 8 tax years after the end of the tax year in which the holding company has the tax loss referred to in subsection (1) or, despite the time bar, by a later date if the Commissioner allows.
Deﬁned in this Act: amount, Commissioner, holding company, mining com- pany, net income, return of income, tax loss, tax year, time bar Compare: 2004 No 35 s IH 4(3) proviso IS 5 Petroleum miners’ tax losses (1) (2) (3) When this section applies This section applies in a tax year in which a petroleum miner with a tax loss for the tax year— (a) relinquishes a petroleum permit for which they have a deduction under section DT 7 (Exploratory well ex- penditure); or incurs expenditure on removal or restoration operations for which they have a deduction under section DT 16 (Removal or restoration operations).
(b) Net losses reduced The petroleum miner’s tax loss is reduced by the amount of the deduction, but only to the extent of the amount of the tax loss.

For the reduction in their tax loss, the petroleum miner is allowed a deduction in an earlier tax year for an amount that is equal to the amount of the reduction.

The deduction is allo- cated under section EJ 14 (Spreading deduction backwards).
Petroleum mining activities outside New Zealand This section applies to a petroleum miner who undertakes pet- roleum mining activities that are— (a) outside New Zealand and undertaken through a branch or a controlled foreign company (CFC); and substantially the same as the petroleum mining activ- ities governed by this Act.
(b) (4) Using tax loss components A shareholder company may use a tax loss component referred to in section IZ 2(2) (Petroleum mining companies: treatment 1687 Part I s IS 6 Income Tax Act 2007 Reprinted as at 1 January 2010 of payments from shareholders) but only in the way described in section IZ 2(3) to (6).
Deﬁned in this Act: amount, CFC, deduction, New Zealand, petroleum miner, petroleum permit, relinquishment, removal or restoration operations, tax loss, tax year Compare: 2004 No 35 ss IH 2(1), IH 3 Section IS 5(2): substituted (with effect on 1 April 2008), on 7 December 2009, by section 71(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
IS 6 When company stops being mining company For the purposes of sections IS 1 to IS 5, if a mining company whose loss balance is carried forward to a tax year stops being a mining company at or before the end of the tax year, the company is nevertheless treated for the tax year as if it had continued as a mining company.
Deﬁned in this Act: loss balance, mining company, tax year Compare: 2004 No 35 ss IH 1, IH 4(1)(e) Subpart IT—Life insurers’ net losses IT 1 Life insurers’ policyholder net losses (1) (1B) Amounts available In calculating their policyholder base income tax liability for a tax year, a life insurer may use an amount of a policyholder net loss carried forward from an earlier tax year.
The policyholder net loss includes an unused policyholder net loss determined under the Income Tax Act 2004 or the Income Tax Act 1994.

Loss carried forward If a life insurer has a balance of a policyholder net loss remain- ing for a tax year after the uses described in this section, the balance, including all unused amounts from earlier tax years, is carried forward to the next tax year as a policyholder net loss carried forward.
Treatment as tax loss component (1C) For the purposes of the application of section IA 10 (Amended assessments), a policyholder net loss under this section is treated as if it were a tax loss component.

1688 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IT 1 (2) Use of policyholder net losses A life insurer may use a policyholder net loss only for the pur- pose of calculating their policyholder base income tax liability.
Restrictions on use (2B) A life insurer must not use a policyholder net loss to reduce a net loss of another life insurer in a tax year except as described in subsection (3).
(3) (4) Transfer of life insurance business If a life insurer transfers their life insurance business to an- other company in the way described in section EY 45(1) (Pol- icyholder income formula: when life insurance business trans- ferred), the life insurer may choose to have their policyholder net loss for the tax year of the transfer treated as the other com- pany’s policyholder net loss instead of their own.
This subsec- tion applies to both a policyholder net loss calculated for a tax year and a loss balance carried forward to a tax year.

Notifying Commissioner If the life insurer chooses to have the policyholder net loss treated as the other company’s policyholder net loss, they must notify the Commissioner of their election.
Deﬁned in this Act: amount, business, Commissioner, company, life insurance, life insurer, loss balance, notify, policyholder base income tax liability, policy- holder net loss, tax loss, tax loss component, tax year Compare: 2004 No 35 ss II 1(3), (4), II 3 Section IT 1(1) heading: substituted (with effect on 1 April 2008), on 7 Decem- ber 2009, by section 72(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IT 1(1): substituted (with effect on 1 April 2008), on 7 December 2009, by section 72(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IT 1(1B) heading: inserted (with effect on 1 April 2008), on 7 Decem- ber 2009, by section 72(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IT 1(1B): inserted (with effect on 1 April 2008), on 7 December 2009, by section 72(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IT 1(1C) heading: inserted (with effect on 1 April 2008), on 7 Decem- ber 2009, by section 72(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IT 1(1C): inserted (with effect on 1 April 2008), on 7 December 2009, by section 72(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

1689 Part I s IV 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Section IT 1(2B) heading: inserted (with effect on 1 April 2008), on 7 Decem- ber 2009, by section 72(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section IT 1(2B): inserted (with effect on 1 April 2008), on 7 December 2009, by section 72(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IT 1 list of deﬁned terms tax loss component: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Conse- quential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Subpart IV—Treatment of certain supplementary dividends IV 1 Supplementary dividend holding companies When this section applies This section applies when a supplementary dividend holding company derives a supplementary dividend in a tax year.
Limit on amount If the company has a tax loss that is a tax loss component under section IA 2(4) (Tax losses), and is entitled to use the amount under section IA 3, IA 4, IC 5, IS 3, or IS 4 (which relate to a company’s use of tax losses), the maximum amount that it may use must be no more than the amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) net income is the company’s net income for the tax year: credits is the total amount of non-refundable tax credits and convertible credits that the company has available under Part L (Tax credits and other credits) to use in reducing its income tax liability: supplementary dividends is the total amount of sup- plementary dividends that the company derives in the tax year: tax rate is the relevant basic tax rate applying in the tax year.
(b) (c) (d) (1) (2) (3) 1690 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IW 1 (4) Calculating credits under Part L Subsection (2) does not affect the calculation under Part L of the non-refundable tax credits and convertible credits of a supplementary dividend holding company.
Deﬁned in this Act: amount, basic tax rate, convertible credit, income tax li- ability, net income, non-refundable tax credit, supplementary dividend, supple- mentary dividend holding company, tax loss, tax loss component, tax year Compare: 2004 No 35 s IF 7 Subpart IW—Use of tax losses to pay shortfall penalties IW 1 Shortfall penalties (1) (2) (3) (4) (5) When this section applies This section applies in a tax year when a person has a shortfall penalty for an income tax liability.
Persons choosing to use tax losses If the person has a tax loss for the tax year, they may use the amount of the tax loss to pay the penalty, notifying the Com- missioner by the due date for payment of the penalty.
Wholly-owned groups choosing to use tax losses If a company that is part of a wholly-owned group of compan- ies has a tax loss for a tax year, the wholly-owned group may use the amount of the tax loss to pay the penalty imposed on the company, notifying the Commissioner by the due date for the payment of the penalty.

Time of use The tax loss is used at the time of notiﬁcation.
Lowest marginal tax rate and availability Each dollar of an amount of tax loss that is used under this section— (a) is equal to 1 dollar multiplied by the rate of tax or lowest marginal rate of tax that would apply to the person in the return period to which the tax shortfall relates if the person had tax to pay: cannot, from the date the tax loss is used, be used or made available for use, or be carried forward to a later tax year.
(b) 1691 Part I s IZ 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (6) Tax years and part-years In this section, a tax year includes a part of a tax year that may be taken into account under this Part for continuity or grouping purposes.
Deﬁned in this Act: amount, Commissioner, company, income tax liability, notify, pay, shortfall penalty, tax, tax loss, tax year, wholly-owned group of companies Compare: 2004 No 35 s IG 10 Subpart IZ—Terminating provisions IZ 1 Use of speciﬁed activity net losses Limit on amount A person’s speciﬁed activity net loss that is carried forward to a tax year and subtracted from the person’s net income for the tax year must be no more than the sum of the net income for the tax year from the conduct of the same speciﬁed activity that gave rise to the net loss and $10,000.
If the person makes the net loss available to another person, the maximum amount that can be subtracted by the other person is $10,000.
When person conducts 2 or more speciﬁed activities For the purposes of subsection (1), if the speciﬁed activity net loss arises from the conduct of 2 or more speciﬁed activities— the amount subtracted from the net income for the tax (a) year must be no more than the lesser of— (i) the sum of the person’s speciﬁed activity net in- come from each of the speciﬁed activities; and $10,000; and (ii) the person may choose by notice which amounts of net income from the speciﬁed activities to subtract from their net income.
(b) When 2 or more persons conduct speciﬁed activity If 2 or more persons conduct a speciﬁed activity, this section applies as if every reference to— (a) (b) a person were a reference to each person; and an amount of speciﬁed activity net loss attributable to the conduct of the speciﬁed activity were a reference to the amount of each person’s share of the amount of any joint speciﬁed activity net loss for the tax year.
(1) (2) (3) 1692 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IZ 1 (4) (5) (6) (7) Income from personal exertion and hardship The Commissioner may determine that the limit under subsec- tion (1) does not apply, and may increase the amount of spe- ciﬁed activity net loss that may be subtracted from a person’s net income under that subsection if— (a) the person is engaged mainly in conducting a speciﬁed activity as their livelihood, and they derive income from personal exertion that— (i) is derived as a result of the conduct of the speci- ﬁed activity but is not income from the speciﬁed activity; and is made for the purpose of enabling the person to meet expenditure essential for the maintenance of either them and their dependants or for the continuation of the speciﬁed activity; and the person, in the opinion of the Commissioner would suffer hardship from the application of subsections (1) to (3).
(ii) (b) Relationship with general loss rules Subparts IA, IC, ID, IE, and IP (which relate to the general use of tax losses) apply to a speciﬁed net loss except to the extent to which subsections (1) to (3) override them.

Established activities excluded This section does not apply to a speciﬁed activity net loss that relates to an established activity.
Related activities A speciﬁed activity is related to another speciﬁed activity, and is treated as part of the other speciﬁed activity, if— (a) it is usually conducted in association with and is com- plementary to the other speciﬁed activity that an exist- ing farmer is already conducting; or it is conducted on land that an existing farmer has owned or held under lease, licence, or other agreement for 5 years before the activity is started and— (i) the existing farmer is carrying on the other spe- ciﬁed activity immediately before the related ac- tivity is started; or (b) 1693 Part I s IZ 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) (iii) the existing farmer elects by notice in their return of income for the tax year in which they start the activity to have the activity treated as related; or the Commissioner determines the activity is re- lated.
(8) Modiﬁcation for speciﬁed activity If this section would have a more favourable effect if the fol- lowing words in paragraph (c)(ii) of the deﬁnition of speciﬁed activity in section YA 1 (Deﬁnitions) were omitted, this sec- tion applies as if those words were omitted: “not including crops for which the preparation of the land, the plant- ing and cultivation of the tree or plant, and the harvesting of the crop are accomplished within 12 months”.
(9) When subsections (10) and (11) apply Subsections (10) and (11) apply for the purposes of the deﬁn- ition of established activity in subsection (12) when— (a) land is transferred under a settlement of relationship property; and the transferor conducted a speciﬁed activity on the land as at 1 October 1982, and the conduct of the activity constituted their livelihood or sole source of income; and the transferee conducts the same speciﬁed activity on the land.
(b) (c) Treatment of transferee (10) The transferee is treated as continuing the speciﬁed activity, and that activity is treated as constituting their livelihood and sole source of income.

Date of commencement (11) For the purposes of subsection (7), if the transferor was an existing farmer immediately before the date of transfer, the transferee is treated as having acquired the land on the date it was acquired by the transferor.
However, if the transferee starts to conduct the same kind of speciﬁed activity on the land that the transferor conducted immediately before the date of transfer, the transferee is not treated as having acquired the land on that date.
1694 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IZ 1 (12) Some deﬁnitions In this section,— conduct means carry on or engage in or hold an interest in a speciﬁed activity, whether or not jointly with another person established activity, for a person who is an existing farmer, means a speciﬁed activity, except an activity within the mean- ing of paragraph (j) of the deﬁnition of speciﬁed activity in section YA 1, that the person conducted on 11 October 1982, if the Commissioner considers the conduct of the speciﬁed ac- tivity constituted the livelihood of the person and their princi- pal source of income existing farmer means a person to whom both the following apply (a) the person conducts in an income year 1 or more of the speciﬁed activities described in paragraphs (a) to (i) of the deﬁnition of speciﬁed activity; and the person’s livelihood and the person’s sole or principal source of income is constituted, throughout the conduct of the speciﬁed activity or the speciﬁed activities in the income year, by the conduct of the speciﬁed activity or the speciﬁed activities (b) income from personal exertion means income of a kind re- ferred to in sections CB 1 and CE 1 (which relate to amounts derived from business and in connection with employment), but does not include income from a business of renting, or lending money, or making ﬁnancial investments land,— (a) includes a lease, or an interest under a lease, of a leased area as deﬁned in the Marine Farming Act 1971; and includes a licence, or an
 interest under a licence, relating to a licensed area as deﬁned in the Marine Farming Act 1971; and includes an improvement on or in relation to the leased area or the licensed area to which a lease or licence under the Marine Farming Act 1971 relates (b) (c) related activity, for a speciﬁed activity conducted by a person in a tax year, means another speciﬁed activity that is treated 1695 Part I s IZ 1 Income Tax Act 2007 Reprinted as at 1 January 2010 as a related activity under subsection (7), whether or
 not it is conducted on the same land as the speciﬁed activity speciﬁed activity means— (a) the business of animal husbandry, including bee-keep- ing, the breeding of horses other than bloodstock, and poultry-keeping: otherwise deriving income from livestock including bees, horses other than bloodstock, and poultry: the business of growing trees or plants— (i) (ii) (iii) for sale as growing trees or plants; or for the production of ﬂowers; or for the production of fruit other than grapes, seeds, vegetables, or other crops, not including crops for which the preparation of the land, the planting and cultivation of the tree or plant, and the harvesting of the crop are accomplished within 12 months: the business of viticulture: the business of freshwater ﬁsh farming: the business of mussel farming: the business of rock oyster farming: the business of scallop farming: the business of sea-case salmon farming: acquiring or holding of land with a view to deriving, from some or all of the land, rents or other revenues from a lease, licence, or other agreement relating to the land (b) (c) (d) (e) (f) (g) (h) (i) (j) speciﬁed activity net income means, for a speciﬁed activity conducted by a person in a tax year, the result of subtracting from the sum of the income of the person allocated to that ac- tivity and the tax year the sum of the deductions of the person allocated to that activity and the tax year, if that result is a posi- tive amount speciﬁed activity net loss
 means, for a speciﬁed activity con- ducted by a person in a tax year preceding the 1986–87 tax year in the case of an activity referred to in paragraphs (a) to (i) of the deﬁnition of speciﬁed activity in section YA 1, and the 1990–91 tax year in the case of an activity referred to in 1696 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IZ 2 paragraph (j) of that deﬁnition, a loss from that speciﬁed ac- tivity referred to in section 188A of the Income Tax Act 1976.
Deﬁned in this Act: amount, business, Commissioner, conduct, deduction, established activity, existing farmer, income, income from personal exertion, land, net income, notice, related activity, return of income, settlement of relationship property, speciﬁed activity, speciﬁed activity net income, speciﬁed activity net loss, tax year Compare: 2004 No 35 ss FF 18, IE 2 IZ 2 Petroleum mining companies: treatment of payments from shareholders (1) (2) (3) When this section applies This section applies if— (a) (b) a tax loss arises from the allowance to a petroleum min- ing company in the 1990–91 tax year, or earlier tax year, of a deduction or further deduction under sections 214B(6), (13)(b), (14)(b), and (18)(c) of the Income Tax Act 1976 (or under section DZ 6(4) or (9)(c) of the In- come Tax Act 1994); and a payment has been made by a company, which is at the time of the payment a shareholder of the petroleum mining company, to the petroleum mining company an amount that was used for the purposes of petroleum de- velopment expenditure of the kind referred to in section DZ 6(4) for which the deduction or further deduction re- ferred to in paragraph (a) is allowed.
Shareholder companies’ tax loss components The shareholder company has a tax loss component equal to the amount that bears to the tax loss the same proportion as the payment bears to the petroleum development expenditure.

However, the amount of the tax loss component must be no more than the total amount paid.
Elections by shareholder companies For the purposes of subsection (2), the shareholder company must make an election by notice under section 214B(22)(d) of the Income Tax Act 1976 or section DZ 6(12)(d) of the Income Tax Act 1994.
1697 Part I s IZ 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) (5) (6) Treatment of tax losses The tax loss may not be carried forward and used except to the extent to which the amount of the tax loss is more than the total of all amounts deducted under subsection (2) in the tax year in which the tax loss arises.
Further deductions Despite subsection (4), if the tax loss arises from the allow- ance of a further deduction under the second proviso to section 214B(6) of the Income Tax Act 1976 or under section DZ 6(4) of the Income Tax Act 1994, the tax loss is treated as a tax loss arising in the tax year which in section DZ 6(4) is referred to as the year of cessation.
Relationship with section CV 1 Section CV 1 (Group companies) does not apply to— (a) a tax loss referred to in this section except to the extent to which it is more than the total of all amounts deducted under subsection (2) in the tax year in which the tax loss arises; or a tax loss for the 1978–79 or earlier tax year.
(b) Deﬁned in this Act: amount, company, deduction, group of companies, notice, petroleum development expenditure, petroleum mining company, shareholder, tax loss, tax year Compare: 2004 No 35 s IH 2 IZ 3 Petroleum mining companies: use of loss balances When this section applies This section applies when— (a) some or all of a loss balance of a petroleum mining company for the 1990–91 tax year or earlier tax year arises from the allowance of— (i) a deduction of an amount of petroleum explor- ation expenditure that the company incurs on or before 30 September 1990 in exploring or search- ing for petroleum in an area that is or is subse- quently comprised in an existing privilege that was a mining licence or in 2 or more such areas; or (1) 1698 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IZ 3 (b) (c) (ii) a deduction of an amount for petroleum develop- ment expenditure that the company incurs before 30 September 1990; and at the start of a tax year following the tax year in which the tax loss arose, a loss balance relating to the permit area remains after taking into account any deductions that the petroleum mining company, or another com- pany, has for the expenditure or any amounts the com- pany has subtracted from its net income for earlier tax years; and the petroleum mining company was immediately before the commencement of section 214B of the Income Tax Act 1976 a company to which section 216 of that Act applied.
Using loss balances Despite section IA 5 (Restrictions on companies’ loss balances carried forward) or GB 3 (Arrangements for carrying forward loss balances: companies), the loss balance may be subtracted from the petroleum mining company’s net income for the tax year referred to in subsection (1)(b) to the extent to which it is no more than the net income of the company for the tax year if the company’s only source of assessable income were from the relevant permit area.
Loss balances carried forward If, after applying subsection (2), the company has a loss bal- ance remaining, the amount is carried forward to the next tax year and subsection (2) applies in that tax year, and so on.
References in section For the purposes of this section,— (a) a reference in this section to expenditure in exploring or searching for petroleum in an area that is or is sub- sequently comprised in an existing privilege that was a mining licence is taken as including a reference to ex- penditure in exploring or searching for petroleum in an area that is outside but continuous or geologically con- tiguous with the area, being exploring or searching that was included, whether originally or additionally, in the programme of exploring or searching as a consequence 1699 (2) (3) (4) Part I s IZ 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) of which application was made for the existing privil- ege: permit area means an area, and may include more than 1 area, of an existing privilege referred to paragraph (d) of the deﬁnition of existing privilege in section 106 of the Crown Minerals Act 1991.
Relationship with section IZ 2 Section IZ 2 overrides this section.
Deﬁned in this Act: amount, assessable income, company, deduction, existing privilege, loss balance, net income, permit area, petroleum development ex- penditure, petroleum exploration expenditure, petroleum mining company, tax loss, tax year Compare: 2004 No 35 s IH 1(2) (5) IZ 4 Tax losses for tax years before 1977–78 tax year A person’s loss balance for a tax year before the 1977–78 tax year is carried forward and may be used under section IA 4 (Using loss balances carried forward to tax year) if the person would have been entitled to have the tax loss carried forward for the purpose of assessing income tax under section 137 of the Land and Income Tax Act 1954 if the Income Tax Act 1976, the Income Tax Act 1994, the Income Tax Act 2004, and this Act had not been passed.
Deﬁned in this Act: assessment, loss balance, tax loss, tax year Compare: 2004 No 35 s IF 1(5) IZ 5 Companies’ tax losses for tax years before 1991–92 tax year Loss balances carried forward A company’s loss balance for a tax year before the 1991–92 tax year may be used under section IA 4 (Using loss balances carried forward to tax year) if— (a) the company would have been entitled to have some or all of the tax loss under section 188 of the Income Tax Act 1976 carried forward to a later tax year, if that section had continued to apply in the later tax year, as modiﬁed by section 188AA of that Act and as if the continuity percentage referred to in section 188(7) of that Act were always 40%; and (1) 1700 Reprinted as at 1 January 2010 Income Tax Act 2007 Part I s IZ 6 (b) for the period starting on the ﬁrst day of the 1992–93 tax year and ending on the last day of the later tax year, a group of persons holds total minimum voting interests in the company that add up to at least 49%.
(2) Market value circumstances and minimum interests For the purposes of subsection (1)(b),— (a) if, during the period a market value circumstance exists for the company, the group of persons must also hold for the period total minimum market value interests in the company that add up to at least 49%: a minimum interest of any person in the company in the period is equal to the lowest interest that the person has in the period.
(b) Deﬁned in this Act: company, group of persons, loss balance, market value circumstance, minimum market value interest, minimum voting interest, tax loss, tax year Compare: 2004 No 35 s IF 1(6) IZ 6 Companies’ tax losses for 1990–91 and 1991–92 tax years (1) (2) (3) (4) When this section applies This section applies to a company that has a tax loss for the 1990–91 or 1991–92 tax year and section 188(7B) of the In- come Tax Act 1976 would not have applied to prevent some or all of the tax loss being carried forward if regard were had to only part of the relevant tax year.
Part-year tax losses carried forward Section 188(7B) does not apply to prevent the part of the tax loss attributable to the relevant part-period being carried for- ward under section 188(2).

Financial statements For the purposes of subsection (2), the company must provide the Commissioner with adequate ﬁnancial statements relating to the relevant part-period that disclose the amount that would be the tax loss for the relevant part of the tax year, on a fair and reasonable basis of attribution.
Application of subsection (7B) In subsection (1), the reference to subsection (7B) applies to the extent to which regard was required to be had to that part of 1701 Part I s IZ 7 Income Tax Act 2007 Reprinted as at 1 January 2010 the period starting with 8.00pm New Zealand Standard Time on 30 July 1991 which falls within the tax year in which the tax loss component arises, and without prejudice to the application of that subsection to the extent to which it required regard to be had to later periods.
Deﬁned in this Act: amount, Commissioner, company, tax loss, tax loss com- ponent, tax year Compare: 2004 No 35 s IF 2 IZ 7 Grouping tax losses for tax years before 1981–82 and between 1981–82 and 1991–92 Commonality period: between 1981–82 and 1991–92 For the purposes of section IC 5(1)(a) (Company B using com- pany A’s tax loss), if company A has a tax loss in a tax year between the 1981–82 and 1991–92 tax years, company A and company B may group the tax loss in a tax year that is later than the tax year in which the tax loss component arises only if company B is in the same group of companies as company A in the earlier tax year.
Commonality period: before 1981–82 For the purposes of section IC 5(1)(a), if company A has a tax loss in a tax year before the 1981–82 tax year, company A and company B may group the tax loss in a tax year that is later than the tax year in which the tax loss component arises only if company B is in the same group of companies as company A in the tax year in which the tax loss is used.
When companies have different balance dates For the purposes of subsections (1) and (2), the tax year is extended under section IC 10(2)(b) (When companies have different balance dates) if company B’s balance date is later than company A’s balance date.
Residence of company A For the purposes of section IC 5(1)(b), if company A’s tax loss component arose in a tax year before the 1991–92 tax year, company A and company B may group the tax loss component in a tax year that is later than the tax year ﬁrst referred to only if company A is, in both the earlier and the later tax year— (1) (2) (3) (4) 1702 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LA 2 (a) (b) incorporated in New Zealand, or carrying on a business in New Zealand through a ﬁxed establishment in New Zealand; and resident in New Zealand, and not treated under a double tax agreement, and for the purposes of the agreement, as not resident in New Zealand, or liable by the law of another country or territory to income tax in that coun- try or territory through domicile, residence, or place of incorporation.
(5) Relationship with sections IC 5 and IC 6 Subsections (1) and (2) override sections IC 5(1)(a) and IC 6 (which relate to grouping requirements) and subsection (4) overrides sections IC 5(1)(b) and IC 6.
Deﬁned in this Act: balance date, business, company, double tax agreement, ﬁxed establishment, group of companies, New Zealand, resident in New Zealand, tax loss, tax loss component, tax year Compare: 2004 No 35 s IG 2(2)(c), (d)(ii)(B) Part L Tax credits and other credits Subpart LA—General rules for tax credits LA 1 What this Part does This Part— (a) (b) identiﬁes when a person’s tax credit arises; and provides the rules that govern the use of a tax credit in satisfying an obligation under section BB 2 (Main obligations).
Deﬁned in this Act: tax credit LA 2 Satisfaction of income tax liability A person must use their total tax credit for a tax year to satisfy their income tax liability for the tax year.
Deﬁned in this Act: income tax liability, tax year, total tax credit Compare: 2004 No 35 s BC 9 1703 Part L s LA 3 Income Tax Act 2007 Reprinted as at 1 January 2010 LA 3 When total tax credit less than or equal to income tax liability (1) (2) Unsatisﬁed income tax liability If a person’s total tax credit for a tax year is less than their income tax liability for the tax year, the person has an amount of unsatisﬁed income tax liability for the tax year.
Amount The amount of unsatisﬁed income tax liability is— (a) equal to the difference between the person’s total tax credit for the tax year and their income tax liability for the tax year: satisﬁed when the person pays their terminal tax for the tax year.
(b) Deﬁned in this Act: amount, income tax liability, tax year, terminal tax, total tax credit Compare: 2004 No 35 s BC 9 LA 4 When total tax credit more than income tax liability Satisﬁed income tax liability If a person’s total tax credit for a tax year is greater than their income tax liability for the tax year, the person must use their total tax credit, including the credits listed in paragraphs (a) to (d), to satisfy their income tax liability by using— (a) (b) (c) (d) ﬁrst, a non-refundable tax credit: second, a tax credit for a supplementary dividend: third, a tax credit for an imputation credit: fourth, a refundable tax credit.
Remaining tax credits A person who has satisﬁed their income tax liability under subsection (1) must deal with their remaining tax credits for the tax year under section LA 5.
Deﬁned in this Act: imputation credit, income tax liability, non-refundable tax credit, refundable tax credit, supplementary dividend, tax credit, tax year, total tax credit Compare: 2004 No 35 ss BC 8(2), BC 9(1), BC 10, KD 4(2), LD 3(3), LD 3A(4), LE 2(6) (1) (2) 1704 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LA 6 LA 5 Treatment of remaining credits (1) (2) (3) (4) (5) What this section applies to This section applies to a remaining tax credit referred to in section LA 4(2).
Non-refundable credits A non-refundable tax credit is extinguished.

However, this subsection does not apply to a tax credit for income tax and foreign income tax paid in relation to foreign attributed income used under section LK 4 (Use of remaining credits).

Credits for supplementary dividends A person uses a tax credit for a supplementary dividend by applying section LP 3 (Use of remaining credits).
Credits for imputation credits A person uses a tax credit for an imputation credit by applying section LE 2 or LE 3 (which relate to the use of remaining tax credits).

Refundable credits The Commissioner refunds a refundable tax credit by applying section LA 6, LA 7, or LA 8.
Deﬁned in this Act: Commissioner, foreign attributed income, foreign income tax, imputation credit, income tax, non-refundable tax credit, refundable tax credit, supplementary dividend, tax credit Compare: 2004 No 35 ss BC 9, BC 10 LA 6 Remaining refundable credits: PAYE, RWT, and certain other items (1) What this section applies to This section applies to a person’s tax credit remaining for a tax year under section LA 5(5) if it is a tax credit under— (a) (b) (c) (cb) (d) section LB 1 (Tax credits for PAYE income payments): section LB 2 (Tax credits for provisional tax payments): section LB 3 (Tax credits for resident withholding tax): section LB 6 (Tax credits for RSCT): subpart LF (Tax credits for foreign dividend payment (FDP) credits): subpart LH (Tax credits for expenditure on research and development), although modiﬁed by section LH 2(6) (db) 1705 Part L s LA 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (Tax credits relating to expenditure on research and de- velopment): subpart LO (Tax credits for Maori authority credits): section LS 1 (Tax credits for portfolio tax rate entities and investors).
(e) (f) Use of credits The Commissioner must— (a) (b) (c) (d) (e) ﬁrst, use a tax credit to satisfy the person’s income tax liability for a tax year that is before the tax year referred to in subsection (1): second, use a tax credit to satisfy the person’s income tax liability for a tax year that is later than the tax year referred to in subsection (1), applying this paragraph to earlier tax years before later tax years: third, pay the person’s provisional tax for a tax year that is later than the tax year referred to in subsection (1), applying this paragraph to earlier tax years before later tax years: fourth, treat a tax credit as tax paid in excess and as transferable under Part 10B of the Tax Administration Act 1994: ﬁfth, refund a tax credit by applying sections RB 4, RM 2 to RM 8, and RM 10 (which relate to refunds and their use), as applicable, and the Tax Administration Act 1994.
Time bar The Commissioner may amend an assessment or a determin- ation to give effect to this section despite the time bar.

Deﬁned in this Act: assessment, Commissioner, income tax liability, PAYE, provisional tax, RWT, tax credit, tax year, time bar Compare: 2004 No 35 ss LD 1, LD 3, LD 3A, LD 6–LD 8, LD 12(5), LH 1(6), MD 1 Section LA 6(1)(cb): inserted, on 1 April 2008, by section 433(1) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section LA 6(1)(db): inserted, on 1 April 2008, by section 433(2) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LA 6(1)(e): amended (with effect on 1 April 2008), on 6 October 2009, by section 308(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(2) (3) 1706 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LA 8 Section LA 6(1)(f): added (with effect on 1 April 2008), on 6 October 2009, by section 308(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LA 6 compare note: amended, on 1 April 2008, by section 433(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LA 7 Remaining refundable credits: tax credits under social policy schemes (1) (2) What this section applies to This section applies to a person’s tax credit remaining for a tax year under section LA 5(5), if it is a tax credit under— (a) (b) section LB 4 (Tax credits for families): section LD 1(5) (Tax credits for charitable and other public beneﬁt gifts).
Use of credits The Commissioner must treat the person’s tax credit as trans- ferable under Part 10B of the Tax Administration Act 1994 or refundable under sections RB 4, RM 2 to RM 8, and RM 10 (which relate to refunds and their use), as applicable.
Deﬁned in this Act: Commissioner, family scheme income, tax credit, tax year Compare: 2004 No 35 ss BC 8(1), KD 4(2), MD 1 Section LA 7 heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 309(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LA 7 heading: substituted, on 1 April 2008, by section 434(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section LA 7(1) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 309(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LA 7(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 309(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LA 7(1): amended, on 1 April 2008, by section 434(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

LA 8 Remaining refundable credits: non-resident withholding tax (1) What this section applies to This section applies to a person’s tax credit remaining for a tax year under section LA 5(5), if it is a tax credit under section LB 5 (Tax credits for non-resident withholding tax).
1707 Part L s LA 9 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Use of credits The Commissioner must— (a) ﬁrst, treat the tax credit as tax paid in excess and as transferable under Part 10B of the Tax Administration Act 1994: second, refund the tax credit under sections RB 4, RM 2 to RM 8, and RM 10 (which relate to refunds and their use), as applicable.
(b) Deﬁned in this Act: Commissioner, non-resident withholding tax, tax credit, tax year Compare: 2004 No 35 ss LD 2, MD 1 LA 9 Use of tax credits An amount of a tax credit is used once, so far as it extends.

Deﬁned in this Act: amount, tax credit Compare: 2004 No 35 ss BC 9(1), LB 2(2), LE 2(4), (8) Section LA 9: amended (with effect on 1 April 2008), on 6 October 2009, by section 311(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section LA 9: amended, on 1 April 2008, by section 435 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

LA 10 Meaning of tax credit An amount is a tax credit of a person if it is their tax credit under a provision in this Part.
Deﬁned in this Act: amount, tax credit Compare: 2004 No 35 s BC 9 Subpart LB—Tax credits for payments, deductions, and family payments Subpart LB heading: substituted, on 1 April 2008, by section 436 of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LB 1 Tax credits for PAYE income payments When this section applies This section applies in a tax year when an employer provides the Commissioner with an employer monthly schedule that shows an amount of tax withheld from a PAYE income pay- ment of a person who is an employee.

(1) 1708 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LB 2 (2) (3) (4) Amount of credit The person has a tax credit for the tax year equal to the amount of tax shown as withheld.
Application to close companies Despite subsection (2), the amount of the tax credit must be no more than the amount of tax paid to the Commissioner if— (a) (b) the employer is a close company; and the employer and the person are associated persons, or the employer and the spouse, civil union partner, or de facto partner of the person are associated persons; and the employer withheld the amount of tax for the PAYE income payment shown in the employer monthly sched- ule.
(c) Exclusions The person’s credit is extinguished if the Commissioner does not receive an employer monthly schedule for the relevant amount of tax, or when the relevant particulars of the schedule are incorrect.

However, the credit is restored to the person if the relevant matter is corrected and, for the purposes of this section, it is as if the error had not been made.
Deﬁned in this Act: amount, amount of tax, associated person, close company, Commissioner, employee, employer, employer monthly schedule, pay, PAYE income payment, tax credit Section LB 1: substituted (with effect on 1 April 2008), on 6 October 2009, by section 312 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
LB 2 Tax credits for provisional tax payments A person has a tax credit for a tax year equal to the amount of provisional tax for the tax year paid by— (a) (b) the person; or an agent of the person, if the agent is liable to pay pro- visional tax on behalf of the person.
Deﬁned in this Act: agent, amount, pay, provisional tax, tax credit, tax year Compare: 2004 No 35 ss LD 6, LD 7 1709 Part L s LB 3 Income Tax Act 2007 Reprinted as at 1 January 2010 LB 3 Tax credits for resident withholding tax (1) (2) (3) Tax credit A person has a tax credit for a tax year equal to the amount of tax withheld and paid in relation to their resident passive in- come for the tax year if the evidential requirements of section 78D of the Tax Administration Act 1994 are met.
Exclusion No credit exists under subsection (1) for an amount of tax for resident passive income that is a replacement payment.

Portfolio tax rate entities and investors in entities For a portfolio tax rate entity and an investor in a portfolio tax rate entity, the amount of a tax credit is limited to the extent allowed under subpart HL (Portfolio investment entities).
Deﬁned in this Act: amount of tax, investor, portfolio tax rate entity, replace- ment payment, resident passive income, resident withholding tax, tax credit, tax withheld, tax year Compare: 2004 No 35 ss LD 3(2), NF 1(2)(b)(ix), (x), NF 8B(b) LB 4 Tax credits for families Tax credits under subparts MD and ME A person has a tax credit for a tax year equal to the total amount of their tax credit under subpart MD (Abating WFF tax credits) and their minimum family tax credit under subpart ME (Min- imum family tax credit) for the tax year.
Adjustments for credits used The person’s tax credit is adjusted if an instalment of the credit under subpart MF (Payment of credits) is used to satisfy an amount of tax for an earlier income year.

The adjustment to the tax credit is equal to the total amount of instalments payable under section MF 1 (Application for payment of tax credit by instalment) that are recovered by the Commissioner under sec- tion MF 6 (Overpayment or underpayment of tax credit) as tax payable by the person.
Deﬁned in this Act: amount, amount of tax, corresponding income year, family scheme income, minimum family tax credit, pay, tax credit, tax year Compare: 2004 No 35 ss KD 1A(2), KD 2(1), KD 3(2), MD 1(3A) Section LB 4 heading: substituted, on 1 April 2008, by section 437(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(1) (2) 1710 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LB 4 Section LB 4: amended, on 1 April 2008, by section 437(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LB 4: amended, on 1 April 2008, by section 437(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LB 4: amended, on 1 April 2008, by section 437(2)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section LB 4: amended, on 1 April 2008, by section 437(2)(d) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LB 4(1) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 314(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LB 4(2) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 314(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LB 4(2): added (with effect on 1 April 2008), on 6 October 2009, by section 314(2) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
inserted (with effect on Section LB 4 list of deﬁned terms amount of tax: 1 April 2008), on 6 October 2009, by section 314(3) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LB 4 list of deﬁned terms corresponding income year: inserted (with effect on 1 April 2008), on 6 October 2009, by section 314(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LB 4 list of deﬁned terms family assistance credit: repealed, on 1 April 2008, by section 437(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LB 4 list of deﬁned terms family tax credit: repealed, on 1 April 2008, by section 437(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section LB 4 list of deﬁned terms minimum family tax credit: inserted, on 1 April 2008, by section 437(3)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section LB 4 list of deﬁned terms pay: inserted (with effect on 1 April 2008), on 6 October 2009, by section 314(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LB 4 compare note: amended (with effect on 1 April 2008), on 6 Oc- tober 2009, by section 314(4) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

1711 Part L s LB 5 Income Tax Act 2007 Reprinted as at 1 January 2010 LB 5 Tax credits for non-resident withholding tax A person has a tax credit for a tax year equal to the amount of tax withheld and paid in relation to their non-resident passive income for the tax year.
Deﬁned in this Act: amount of tax, non-resident passive income, non-resident- withholding tax, pay, tax credit, tax withheld, tax year Compare: 2004 No 35 s LD 2 LB 6 Tax credits for RSCT When this section applies This section applies when— (a) (b) (c) a person derives income as a retirement scheme contri- bution in an income year; and the retirement scheme contributor pays RSCT for the contribution; and the income is not excluded income of the person under section CX 50B (Contributions to retirement savings schemes).
Tax credit: New Zealand resident If the person is resident in New Zealand, they have a tax credit for the tax year corresponding to the income year of an amount equal to the RSCT withheld.

Tax credit: non-resident If the person is not resident in New Zealand, they have a tax credit for the tax year corresponding to the income year of an amount equal to the excess of RSCT withheld over NRWT paid in relation to the contribution.
When contribution is taxable Maori authority distribution If the person is not resident in New Zealand and the retirement scheme contribution is a taxable Maori authority distribution, they have a tax credit for the tax year corresponding to the income year of an amount equal to the RSCT withheld.
Deﬁned in this Act: amount, excluded income, income, income year, non-resi- dent, NRWT, pay, resident in New Zealand, retirement scheme contribution, retirement scheme contributor, RSCT, tax credit, tax year Compare: 2004 No 35 s LD 12(1)–(4) Section LB 6: substituted, on 1 April 2008, by section 438(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(1) (2) (3) (4) 1712 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LB 7 LB 7 Tax credits related to personal service rehabilitation payments: providers (1) (2) (3) (4) When this section applies This section applies when— (a) a person— (i) is paid under the Injury Prevention, Rehabilita- tion, and Compensation Act 2001 a personal ser- vice rehabilitation payment for a period for a key aspect of social rehabilitation referred to in the deﬁnition of personal service rehabilitation payment; and pays another person (a provider) for providing the key aspect to them for the period; or the Accident Compensation Corporation pays a provider a personal service rehabilitation payment for a period for providing a key aspect of social rehabilita- tion to the person.
(ii) (b) Tax credit The provider has a tax credit for the tax year corresponding to the income year in which the period falls.
Amount The amount of the tax credit is calculated using the formula— amount paid × tax rate 1 – tax rate Deﬁnition of items in formula In the formula,— (a) amount paid is the amount paid to the provider for pro- viding a key aspect of social rehabilitation to the per- son for the period, to the extent to which the amount is equal to or less than the amount of the personal service rehabilitation payment for the period after taking into account any amount of tax withheld: tax rate is the rate of tax applying to the personal ser- vice rehabilitation payment under schedule 4, part I, clause 1 (Rates of tax for schedular payments) unless (b) 1713 Part L s LB 8 Income Tax Act 2007 Reprinted as at 1 January 2010 the payment is 1 of the following kinds, in which case the rate of tax is that set out in the subparagraph: (i) for a payment to which section RD 18 (Schedular payments without notiﬁcation) applies, the rate under schedule 4, part I, clause 1 together with any additional amount required to be withheld under section RD 18, determined using the rates set out in that section: for a payment to which a special tax rate certiﬁ- cate applies, the rate applying to the payment as determined by the Commissioner under section 24N of the Tax Administration Act 1994.
(ii) Deﬁned in this Act: amount, amount of tax, income year, pay, personal service rehabilitation payment, tax credit, tax year Compare: 2004 No 35 s LD 1B Section LB 7: added, on 1 July 2008, by section 438(2) of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LB 7(4)(b): substituted (with effect on 1 July 2008), on 6 October 2009, by section 315(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LB 8 Tax credits related to personal service rehabilitation payments: payers When this section applies This section applies when— (a) a person is paid under the Injury Prevention, Rehabili- tation, and Compensation Act 2001 a personal service rehabilitation payment for a period for a key aspect of social rehabilitation referred to in the deﬁnition of per- sonal service rehabilitation payment ; and the person pays another person (the provider) for pro- viding the key aspect to them for the period; and the amount paid to the provider is less than the amount of the personal service rehabilitation payment to the per- son for the period after taking into account any amount of tax withheld.
(b) (c) Tax credit The person has a tax credit for the tax year corresponding to the income year in which the period falls to the extent of the amount calculated using the formula— (1) (2) 1714 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LB 8 total tax withheld — amount paid × tax rate 1 – tax rate (3) Deﬁnition of items in formula In the formula,— (a) (b) (c) total tax withheld is the total amount of tax withheld from the personal service rehabilitation payment paid to the person for the period: amount paid is the amount paid to the provider: tax rate is the rate of tax applying to the personal ser- vice rehabilitation payment under schedule 4, part I, clause 1 (Rates of tax for schedular payments) unless the payment is 1 of the following kinds, in which case the rate of tax is that set out in the subparagraph: (i) for a payment to which section RD 18 (Schedular payments without notiﬁcation) applies, the rate under schedule 4, part I, clause 1 together with any additional amount required to be withheld under section RD 18, determined using the rates set out in that section: for a payment to which a special code applies, the rate applying to the payment as determined by the Commissioner under section 24N of the Tax Administration Act 1994.
(ii) Deﬁned in this Act: amount, amount of tax, income year, pay, personal service rehabilitation payment, tax credit, tax year Compare: 2004 No 35 s LD 1C Section LB 8: added, on 1 July 2008, by section 438(2) of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LB 8(3)(c): substituted (with effect on 1 July 2008), on 6 October 2009, by section 316(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Subpart LC—Tax credits for natural persons Tax credits for persons on low incomes [Repealed] Heading: repealed (with effect from 1 April 2008), on 29 May 2008, by section 24(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
1715 Part L s LC 1 Income Tax Act 2007 Reprinted as at 1 January 2010 LC 1 When net income under low income amount [Repealed] Section LC 1: repealed (with effect from 1 April 2008), on 29 May 2008, by section 24(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
LC 2 When net income in low income abatement range [Repealed] Section LC 2: repealed (with effect from 1 April 2008), on 29 May 2008, by section 25(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Tax credits for children LC 3 Child’s income When this section applies This section applies for a tax year when a person derives in- come and is younger than— (a) (b) 15; or 18, and is attending— (i) a private primary school or a state primary school or a private secondary school or a state secondary school (in each case as deﬁned in the Education Act 1964); or an integrated school (as deﬁned in section 2 of the Private Schools Conditional Integration Act 1975); or a school providing special education (as deﬁned in the Education Act 1964 and the Education Act 1989); or during the previous tax year was a person to whom paragraph (b) applied; and turned 18 on or after 1 January in that previous tax year; and continues to attend a school of any of the kinds referred to in paragraph (b).
(ii) (iii) (ii) (iii) (c) 19, and— (i) Exclusion Despite subsection (1), if the person has a tax credit under section LC 4, they are not allowed a credit under this section.

(1) (2) 1716 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LC 4 (3) Amount of credit The person has a tax credit equal to an amount that is the lesser of— (a) (b) $292.50; and an amount calculated using the formula in subsection (4).
Formula The formula referred to in subsection (3)(b) is— (4) (net income resident passive − income) × 12.5 100.

(5) Deﬁnition of items in formula In the formula,— (a) (b) net income is the person’s net income for the tax year: resident passive income is the resident passive income derived by the person in the tax year.
Deﬁned in this Act: amount, income, net income, resident passive income, tax credit, tax year Compare: 2004 No 35 s KC 2 Section LC 3(3)(a): amended, on 1 April 2009, by section 26(2)(a) of the Taxa- tion (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section LC 3(3)(a): amended (with effect from 1 April 2008), on 29 May 2008, by section 26(1)(a) of the Taxation (Personal Tax Cuts, Annual Rates, and Re- medial Matters) Act 2008 (2008 No 36).
Section LC 3(4) formula: amended, on 1 April 2009, by section 26(2)(b) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section LC 3(4) formula: amended (with effect from 1 April 2008), on 29 May 2008, by section 26(1)(b) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Tax credits for transitional circumstances LC 4 Tax credits for transitional circumstances (1) When this section applies This section applies in a tax year to a person who is engaged in full-time work other than a person who— 1717 Part L s LC 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) (c) (d) is a child younger than 18, other than a child older than 15 who has stopped going to a school of any of the kinds referred to in section LC 3(1)(b): is treated under section YD 1 (Residence of natural per- sons) as not resident in New Zealand throughout the tax year: has a tax credit for the tax year under subpart MB (Ad- justment of net income for family scheme): is throughout the tax year, the spouse, civil union part- ner, or de facto partner of a person who has a tax credit for the tax year under subpart MB.
Amount of credit The person has a tax credit equal to an amount calculated using the formula— Deﬁnition of items in formula In the formula in subsection (2),— (a) person’s net income is— (i) (ii) $728, if the net income of the person for the tax year is less than $6,241; or an amount calculated using the formula in sub- section (4), if the net income of the person for the tax year is $6,241 or more: (b) weekly periods is the number of periods of 1 week for which the person is engaged in full-time work.
Formula The formula referred to in subsection (3)(a)(ii) is— $728 − ((person’s net income − $6,240) × 0.20).

Deﬁnition of item in formula In the formula in subsection (4), person’s net income means the person’s net income for the tax year in complete dollars.
Deﬁned in this Act: amount, civil union partner, de facto partner, engaged in fulltime work, net income, resident in New Zealand, spouse, tax credit, tax year Compare: 2004 No 35 s KC 3(1) Section LC 4(4) formula: amended (with effect on 1 April 2008), on 6 October 2009, by section 317(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(2) (3) (4) (5) 1718 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LC 5 LC 5 Meaning of engaged in full-time work (1) (2) (3) (4) Meaning For the purposes of section LC 4, a person who is engaged in full-time work for a week, means a person who, in the week, is engaged in paid work for at least 20 hours.
Inclusions A person engaged in full-time work includes a person who is not engaged in paid work for the following reasons: (a) if they suffer incapacity due to personal injury by ac- cident for which compensation is or will be paid when otherwise they would have been engaged in paid work: if they are on parental leave during a week for which a parental leave payment is payable under Part 7A of the Parental Leave and Employment Protection Act 1987: if they are temporarily, or for an indeﬁnite period, in- capacitated for work through sickness or accident in relation to which a sickness beneﬁt is or will be paid under the Social Security Act 1964 when otherwise they would have been engaged in paid work.
(b) (c) Uniform daily rate For the purposes of the deﬁnition of engaged in full-time work, if a person performs paid work in a pay period that consists of a period longer than 1 week, the person is treated as having been engaged in paid work at a uniform daily rate throughout that pay period.
Meaning of personal injury by accident, and compensation For the purposes of subsection (2)(a),— (a) personal injury by accident means— (i) personal injury by accident within the meaning of section 2 of the Accident Compensation Act 1982: personal injury within the meaning of section 4 of the Accident Rehabilitation and Compensation Insurance Act 1992: personal injury within the meaning of section 13 of the Accident Insurance Act 1998: (ii) (iii) 1719 Part L s LC 5 Income Tax Act 2007 Reprinted as at 1 January 2010 (iv) personal injury within the meaning of section 6 of the Injury Prevention, Rehabilitation, and Compensation Act 2001: compensation means— (i) (ii) (iii) (iv) (v) (vi) earnings related compensation under section 2 of the Accident Compensation Act 1982: compensation for loss of earnings payable under sections 38, 39, and 43 of the Accident Rehabili- tation and Compensation Insurance Act 1992: a vocational rehabilitation allowance payable under section 25 of the Accident Rehabilitation and Compensation Insurance Act 1992: compensation for loss of potential earning cap- acity payable under section 45 or 46 of the Acci- dent Rehabilitation and Compensation Insurance Act 1992: weekly compensation payable under section 58, 59, or 60 of the Accident Rehabilitation and Compensation Insurance Act 1992: continued compensation payable under section 138 of the Accident Rehabilitation and Compen- sation Insurance Act 1992: (vii) weekly compensation payable under section 428(2) or 429(2) or schedule 1, part 2
 of the Accident Insurance Act 1998: (viii) compensation payable under section 445, 446, or 447 or schedule 1, clauses 67, 70, and 71 of the Accident Insurance Act 1998 that is or will be paid when the person would have been engaged in full-time work, if not for the death of another person: (ix) weekly compensation within the meaning of sec- tions 6 and 365 and schedule 1, part 2 of the In- jury Prevention, Rehabilitation, and Compensa- tion Act 2001: compensation payable under sections 383, 384, and 385 and schedule 1, clauses 66, 70, and 71 of the Injury Prevention, Rehabilitation, and Com- pensation Act 2001.
(x) (b) 1720 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LC 6 (5) Meaning of paid work Paid work, for a person, means work from, by, or through the performance of which the person derives assessable income.
Deﬁned in this Act: assessable income, compensation, engaged in full-time work, paid work, pay period, personal injury by accident Compare: 2004 No 35 s KC 3(3) full-time earner, remunerative work Tax credits for housekeeping LC 6 Tax credits for housekeeping (1) (2) (3) (4) Amount of credit A person who makes housekeeping payments in a tax year for the services of a housekeeper and who meets the requirements of section 41A of the Tax Administration Act 1994, has a tax credit equal to the lesser of— (a) (b) $310; and an amount calculated using the formula in subsection (2).
Formula The formula referred to in subsection (1)(b) is— housekeeping payments × 0.33.

Deﬁnition of item in formula In the formula, housekeeping payments is the amount of housekeeping payments that the person makes during the tax year in complete dollars.
Refundable credits A credit under this section is a refundable tax credit under section LA 7 (Remaining refundable credits: tax credits under social policy schemes) and excluded from the application of sections LA 2 to LA 6 (which relate to a person’s income tax liability).
Deﬁned in this Act: amount, housekeeper, housekeeping payments, refundable tax credit, tax credit, tax year Compare: 2004 No 35 s KC 4(1), (1A) Section LC 6(4): amended (with effect on 1 April 2008), on 6 October 2009, by section 318 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section LC 6(4): amended, on 1 April 2008, by section 439 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1721 Part L s LC 7 Income Tax Act 2007 Reprinted as at 1 January 2010 LC 7 Meaning of housekeeper (1) Deﬁnition For the purposes of section LC 6, housekeeper, for a person (person A) and a tax year, means,— (a) if person A is a widow, a widower, a surviving civil union partner, a surviving de facto partner, a divorced person, a person whose civil union has been dissolved, a person who is not in a marriage, civil union, or de facto relationship, or a separated person,— (i) a person or an institution that has the care and control of a household member, either in person A’s home or elsewhere; or a person who tends person A’s home if the per- son’s services are necessary because of a mental or physical inﬁrmity or disability of person A; or if person A is living with their spouse, civil union part- ner, or de facto partner,— (i) (ii) a person or an institution that has the care and control of a household member, either in person A’s home or elsewhere, if the services of the per- son or the institution are necessary because of a mental or physical inﬁrmity or disability of per- son A or their spouse, civil union partner, or de facto partner; or a person who tends person A’s home, if the ser- vices of the person or the institution are neces- sary because of a mental or physical inﬁrmity or disability of person A or their spouse, civil union partner, or de facto partner; or (ii) if person A is living with their spouse, civil union part- ner, or de facto partner, a person or an institution that has the care and control of a household member, either in person A’s home or elsewhere, if the services of the person or the institution are necessary because of the employment or business activities of both person A and their spouse, civil union partner, or de facto partner.
(b) (c) When both partners have credits Despite subsection (1)(c), if person A and their spouse, civil union partner, or de facto partner have a credit under section (2) 1722 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LC 8 LC 6, the Commissioner may apportion the amount of the credit as is fair and equitable.

The maximum amount that may be apportioned in this way is $310.
Deﬁned in this Act: amount, business, Commissioner, employment, home, household member, institution, separated person, tax year Compare: 2004 No 35 s KC 4(2) housekeeper LC 8 Some deﬁnitions For the purposes of sections LC 6 and LC 7,— home, for a person and a tax year,— (a) means the dwelling in which the person resides during (b) the tax year: does not include a motel, hotel, boardinghouse, guest house, convalescent home, nursing home, rest home, hospital, hospice, or other similar establishment, other than a part of an establishment that is occupied by any person regularly engaged in carrying on the activity of operating the establishment or by the person’s spouse, civil union partner, or de facto partner household member means a person who is— (a) (b) younger than 18; or suffering from a mental or physical inﬁrmity or disabil- ity affecting their ability to earn a living housekeeping payments, in relation to a person and a tax year, means payments— (a) that are made by the person during the tax year for the services of a housekeeper; and for which no credit under any other provision of this Act is allowed to the person or to any other person (b) institution— (a) means a creche, day nursery, play centre, kindergarten, (b) or similar body: does not, in relation to the care and control of a house- hold member who is 5 or older, include an institution 1723 Part L s LC 9 Income Tax Act 2007 Reprinted as at 1 January 2010 that is, in any way, concerned with the education of the household member.
Deﬁned in this Act: home, household member, housekeeper, institution, pay, tax year Compare: 2004 No 35 s KC 4(2) child, communal home, home, institution, qualifying payments, separated person Tax credits for absentees LC 9 Tax credits for absentees When this section applies This section applies when— (a) an absentee has derived assessable income from their personal services while they are personally present in New Zealand in a tax year; and the absentee would have a tax credit under any of sec- tions LC 3 to LC 6 if they were not an absentee.
(b) Amount of tax credit under applicable section The absentee has a tax credit under the applicable section equal to an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) credit amount is the tax credit that the person would have under the applicable section if they were not an absentee: days is the total number of days in the period for which the person is paid for the personal services.
(b) Deﬁned in this Act: absentee, amount, assessable income, New Zealand, pay period, tax credit, tax year Compare: 2004 No 35 s KF 3 Section LC 9(1)(b): amended (with effect from 1 April 2008), on 29 May 2008, by section 27(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remed- ial Matters) Act 2008 (2008 No 36).
(1) (2) (3) 1724 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LC 11 Adjustments to certain tax credits LC 10 Adjustment for change in return date (1) (2) (3) When this section applies This section applies when— (a) (b) section 39 of the Tax Administration Act 1994 applies to a person; and for the purposes of that section, the person provides a return of income for a period that is— (i) (ii) more than a year.
less than a year; or Adjustment The amount of the total tax credits that the person has under this subpart is adjusted using the formula— Deﬁnition of items in formula In the formula,— (a) person’s total credits is the total of the person’s tax credits under sections LC 3 to LC 6: days is the number of days in the period in relation to which the person provides the return.
(b) Deﬁned in this Act: amount, return of income, tax credit, total tax credit, year Compare: 2004 No 35 s KB 2 Section LC 10(3)(a): amended (with effect from 1 April 2008), on 29 May 2008, by section 28(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
LC 11 Adjustment when person is non-resident for part of tax year (1) (2) When this section applies This section applies— (a) (b) for the purposes of section LC 4; and when a person is a non-resident for part of a tax year.
Amount of tax credit under applicable section The person’s tax credit under the applicable section is calcu- lated— 1725 Part L s LC 12 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) (c) ﬁrst, by determining an annualised amount for the per- son’s net income calculated using the formula in sub- section (3); and second, by using the annualised amount calculated under paragraph (a) in the calculation of the credit in the applicable section; and third, by calculating the amount of the credit by using the formula in subsection (4).
Formula: increasing net income The formula referred to in subsection (2)(a) is— (3) Formula: reducing amount of credit The formula referred to in subsection (2)(c) is— (4) (5) (6) Deﬁnition of items in formulas In the formulas in subsections (3) and (4),— (a) person’s net income is the amount of the person’s net income for the period that the person is a New Zealand resident: days is the total number of days for which the person is a New Zealand resident: person’s total credit is the total of the person’s tax credits under the applicable section.
(b) (c) Relationship with section LC 12 This section is overridden by section LC 12.

Deﬁned in this Act: amount, net income, New Zealand resident, non-resident, tax credit, tax year Compare: 2004 No 35 ss KC 1(2), KC 3(2) Section LC 11(1)(a): amended (with effect from 1 April 2008), on 29 May 2008, by section 29(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
LC 12 Assessment when person is non-resident When this section applies This section applies— (1) 1726 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LC 13 (2) (3) (a) (b) for the purposes of section LC 4; and when a person derives for a tax year assessable income from New Zealand during the part of the tax year when the person is a non-resident.

Determination of net income The Commissioner may determine the amount of the net in- come of the person for the tax year.
(b) Fairness of determination A determination under subsection (2) must be fair, having re- gard to— (a) the kind of assessable income derived by the person; and the circumstances in which the assessable income is de- rived; and any other matters the Commissioner considers relevant to the intended meaning of section LC 4, as applicable.
Deﬁned in this Act: amount, assessable income, assessment, Commissioner, derived from New Zealand, net income, non-resident, tax year Compare: 2004 No 35 ss KC 1(3), KC 3(2) (c) Section LC 12(1)(a): amended (with effect from 1 April 2008), on 29 May 2008, by section 30(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section LC 12(3)(c): amended (with effect from 1 April 2008), on 29 May 2008, by section 30(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Tax credits for independent earners Heading: added, on 1 April 2009, by section 31 of the Taxation (Urgent Meas- ures and Annual Rates) Act 2008 (2008 No 105).
LC 13 Tax credits for independent earners (1) When this section applies This section applies for a natural person, for a period (the credit period) in a tax year when the person–– (a) (b) (c) (d) is not receiving an income-tested beneﬁt; and is not receiving a veteran’s pension; and is not receiving New Zealand superannuation; and is not entitled to a WFF tax credit; and 1727 Part L s LC 13 Income Tax Act 2007 Reprinted as at 1 January 2010 (e) (f) (g) is not the spouse, civil union partner, or de facto partner of a person who is entitled to a WFF tax credit; and is not receiving an amount that is— (i) (ii) granted outside New Zealand; and in the nature of, and paid for similar purposes as, a beneﬁt, pension, superannuation payment, or tax credit described in paragraphs (a) to (d); and is not the spouse, civil union partner, or de facto partner of a person who receives an amount that is— granted outside New Zealand; and (i) in the nature of, and paid for similar purposes as, (ii) a tax credit described in paragraph (d); and (h) is resident in New Zealand.
Amount of credit For the credit period, the person has a tax credit equal to the positive amount calculated using the formula–– (person’s credit − full year abatement) × credit period months / 12.

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (4) to (6).

Person’s credit Person’s credit is, if the person’s net income for the tax year is equal to or more than $24,000, $520.

Otherwise it is zero.


Full year abatement Full year abatement is, if the person’s net income is greater than $44,000 for the tax year, 13 cents for each complete dollar of the excess.

Credit period months Credit period months is the number of whole months in the credit period.
Deﬁned in this Act: amount, civil union partner, de facto partner, income-tested beneﬁt, net income, New Zealand superannuation, resident in New Zealand, tax credit, tax year, veteran’s pension, WFF tax credit Section LC 13: added, on 1 April 2009, by section 31 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
(2) (3) (4) (5) (6) 1728 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LD 1 Subpart LD—Tax credits for charitable or other public beneﬁt gifts LD 1 Tax credits for charitable or other public beneﬁt gifts (1) (2) (3) (4) (5) Amount of credit A person who makes a charitable or other public beneﬁt gift in a tax year and who meets the requirements of section 41A of the Tax Administration Act 1994 has a tax credit for the tax year equal to the amount calculated using the formula in subsection (2).
Formula The formula referred to in subsection (1) is— total gifts × 331/3%.

Deﬁnition of item in formula In the formula, total gifts means the total amount of all charit- able or other public beneﬁt gifts made by the person in the tax year.
Administrative requirements Despite subsection (1), the requirements of section 41A are modiﬁed if a tax agent applies for a refund under that section on behalf of a person, and— (a) the tax agent sees the receipt for the person’s charitable or other public beneﬁt gift; and the person retains the receipt for 4 tax years after the tax year to which the claim relates.
(b) Refundable credits A credit under this section is a refundable tax credit under section LA 7 (Remaining refundable credits: tax credits under social policy schemes) and is excluded from the application of sections LA 2 to LA 6 (which relate to a person’s income tax liability).
Deﬁned in this Act: amount, charitable or other public beneﬁt gift, refundable tax credit, tax agent, tax credit, tax year Compare: 2004 No 35 s KC 5 Section LD 1(1): substituted, on 1 April 2008, by section 440(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LD 1(2): amended, on 1 April 2008, by section 440(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1729 Part L s LD 2 Income Tax Act 2007 Reprinted as at 1 January 2010 Section LD 1(5): amended (with effect on 1 April 2008), on 6 October 2009, by section 321 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section LD 1(5): amended, on 1 April 2008, by section 440(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LD 2 Exclusions This subpart does not apply to any of the following persons: (a) (b) (c) (d) (e) (f) an absentee: a company: a public authority: a Maori authority: an unincorporated body: a trustee liable for income tax under subpart HC, and section HZ 2 (which relate to trusts and distributions from trusts).
Deﬁned in this Act: absentee, company, income tax, Maori authority, public authority, trustee Compare: 2004 No 35 s KC 5(1) LD 3 Meaning of charitable or other public beneﬁt gift Meaning For the purposes of this subpart, a charitable or other public beneﬁt gift— (a) means a gift of $5 or more that is paid to a society, in- stitution, association, organisation, trust, or fund, de- scribed in subsection (2) or listed in schedule 32 (Re- cipients of charitable or other public beneﬁt gifts): includes a subscription paid to a society, institution, as- sociation, organisation, trust, or fund, only if the sub- scription does not confer any rights arising from mem- bership in that or any other society, institution, associ- ation, organisation, trust, or fund: does not include a testamentary gift.
(b) (c) Description of organisations The following are the entities referred to in subsection (1)(a): a society, institution, association, organisation, or trust (a) that is not carried on for the private pecuniary proﬁt of an individual, and whose funds are applied wholly (1) (2) 1730 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LE 1 (b) (bb) (bc) (c) (d) or mainly to charitable, benevolent, philanthropic, or cultural purposes within New Zealand: a public institution maintained exclusively for any 1 or more of the purposes within New Zealand set out in paragraph (a): a Board of Trustees that is constituted under Part 9 of the Education Act 1989 and is not carried on for the private pecuniary proﬁt of any individual: a tertiary education institution that is established under Part 14 of the Education Act 1989 and is not carried on for the private pecuniary proﬁt of any individual: a fund established and maintained exclusively for the purpose of providing money for any 1 or more of the purposes within New Zealand set out in paragraph (a), by a society, institution, association, organisation, or trust that is not carried on for the private pecuniary proﬁt of an individual: a public fund established and maintained exclusively for the purpose of providing money for any 1 or more of the purposes within New Zealand set out in paragraph (a).
Deﬁned in this Act: charitable or other public beneﬁt, charitable purpose, gift, New Zealand, pay Compare: 2004 No 35 s KC 5(1)(aa)–(cp), (4) Section LD 3(2)(bb): inserted, on 1 July 2008, by section 31 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section LD 3(2)(bc): inserted, on 1 July 2008, by section 31 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Subpart LE—Tax credits for imputation credits LE 1 Tax credits for imputation credits (1) Amount of credit A person whose assessable income for an income year in- cludes an imputation credit has a tax credit for the tax year cor- responding to the income year of an amount equal to the sum of the amount of the imputation credit and any credit carried forward from an earlier tax year.
Section OZ 11 (Tax credits 1731 Part L s LE 1 Income Tax Act 2007 Reprinted as at 1 January 2010 for imputation credits and FDP credits) may apply to modify this section.

Portfolio tax rate entities and their investors (1B) An investor in a portfolio tax rate entity who is allocated an imputation credit under section HL 29(7)(b) (Credits received by portfolio tax rate entity or portfolio investor proxy) has a tax credit for the tax year of an amount equal to the amount of the imputation credit.
(2) (3) (4) Exclusion For a returning share transfer, a share user does not have a tax credit for an imputation credit attached to a dividend derived in a period in which they hold a share acquired under the transfer.

However, a person providing a share under a returning share transfer is allowed a tax credit for the amount of an imputation credit recorded in the credit transfer notice, see section LE 7.
When amount altered The amount of the person’s credit in subsection (1) may be reduced or increased if any of sections LE 4 to LE 10 apply.
Portfolio tax rate entities and investors in entities [Repealed] [Repealed] FIF income (4B) For the purposes of this section, an amount that would, in the absence of section EX 59 (Codes: comparative value method, deemed rate of return method, fair dividend rate method, and cost method), be income of a person from an attributing inter- est in a FIF is treated as if it were assessable income of the person.
Arrangements for tax advantage A person’s credit under this section is extinguished if any of the following sections apply: (a) section GB 36 (Reconstruction of imputation arrange- ments to obtain tax advantage): section GB 37 (Arrangements for payment of dividend by other companies): (b) (5) 1732 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LE 2 (c) section GB 38 (When sections GB 35 to GB 37 apply to consolidated groups).
Deﬁned in this Act: amount, assessable income, attributing interest, credit trans- fer notice, dividend, FIF, imputation credit, income, income year, investor, port- folio tax rate entity, returning share transfer, share, share user, tax credit, tax year Compare: 2004 No 35 ss LB 1(1)(j), (k), LB 2(1), (1B), (1C), (2C) Section LE 1(1): amended (with effect on 1 April 2008), on 6 October 2009, by section 324(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LE 1(1B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 324(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LE 1(1B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 324(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LE 1(4) heading: repealed (with effect on 1 April 2008), on 6 October 2009, pursuant to section 324(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LE 1(4): repealed (with effect on 1 April 2008), on 6 October 2009, by section 324(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LE 1(4B) heading: inserted, on 1 April 2008, by section 441(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LE 1(4B): inserted, on 1 April 2008, by section 441(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LE 1 list of deﬁned terms attributing interest: inserted, on 1 April 2008, by section 441(2) of the Taxation (Business Taxation and Remedial Mat- ters) Act 2007 (2007 No 109).
Section LE 1 list of deﬁned terms FIF: inserted, on 1 April 2008, by section 441(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LE 1 list of deﬁned terms income: inserted, on 1 April 2008, by section 441(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LE 2 Use of remaining credits by companies and trustees (1) (2) When this section applies This section applies when a person described in subsection (2) has an amount of tax credit remaining for a tax year under section LA 5(4) (Treatment of remaining credits).

Certain persons only The person referred to in subsection (1) must be— (a) a company; or 1733 Part L s LE 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (b) (c) a trustee (other than the Maori trustee); or a Maori authority.
Calculating amount of tax loss component The person has a tax loss component for the corresponding in- come year equal to an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) (b) person’s remaining credit is the amount of the tax credit remaining for the tax year under section LA 5(4): tax rate is the basic rate of income tax set out in sched- ule 1, part A (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts).
Deﬁned in this Act: amount, company, corresponding income year, income tax, Maori authority, tax loss component, tax year, trustee Compare: 2004 No 35 ss GC 22(4), (5), (9), GC 23, GC 24, LB 2(2B), (3) Section LE 2(4)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LE 3 Use of remaining credits by others When this section applies This section applies when a person other than a person referred to in section LE 2(2) has an amount of tax credit remaining for a tax year under section LA 5(4) (Treatment of remaining credits).

Amount carried forward The amount may be carried forward to the next tax year as a credit carried forward.
Amount of reduction The person’s credit is reduced by an amount equal to the amount carried forward and extinguished by the Commis- sioner under section 177C of the Tax Administration Act 1994.
Deﬁned in this Act: amount, Commissioner, tax credit, tax year Compare: 2004 No 35 ss LB 1(1)(hb), LB 2(2B), (3B), (3C) (1) (2) (3) 1734 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LE 5 LE 4 Trustees for minor beneﬁciaries (1) (2) When this section applies This section applies when a person who has a tax credit under section LE 1 is the trustee of a trust for a minor who derives beneﬁciary income from the trust.
Trustee treated as beneﬁciary To the extent to which section HC 7(2) (Trustee income) ap- plies, the person is treated as deriving the minor’s beneﬁciary income as a beneﬁciary.
Deﬁned in this Act: beneﬁciary income, minor, tax credit, trustee Compare: 2004 No 35 ss LB 1(1)(ab), LB 1A LE 5 Beneﬁciaries of trusts (1) (2) (3) When this section applies This section applies when a person who has a tax credit under section LE 1 is the beneﬁciary of a trust and, in that capacity, derives a dividend with an imputation credit attached.
Limitation on amount of credit The person’s credit is limited to an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) (b) (c) person’s distributions is the total distributions for the tax year made to the person in their capacity as beneﬁ- ciary of the trust: trust distributions is the total distributions for the tax year made to all beneﬁciaries of the trust in their cap- acity as beneﬁciaries and includes all supplementary dividends paid to them: total beneﬁciary credits is the total imputation credits attached to dividends and total supplementary divi- dends for the tax year paid to all beneﬁciaries of the trust in their capacity as beneﬁciaries: 1735 Part L s LE 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (d) person’s supplementary dividend is the total supple- mentary dividends for the tax year paid to the person in their capacity as beneﬁciary of the trust.
Deﬁned in this Act: amount, distribution, dividend, imputation credit, pay, sup- plementary dividend, tax credit, tax year Compare: 2004 No 35 s LB 1(1)(a), (2)–(3A) LE 6 Partners in partnerships When this section applies This section applies when a person who has a tax credit under section LE 1 is a partner in a partnership and, through the part- nership, derives a dividend with an imputation credit attached.
Limitation on amount of credit The person’s credit is limited to an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) (ii) partner’s income is the total assessable income of the person for the tax year derived as a partner of the part- nership excluding— (i) an imputation credit or a foreign dividend pay- ment (FDP) credit attached to a dividend derived by the person: a supplementary dividend derived by the person as a non-resident partner of the partnership: partnership income is the total assessable income for the tax year of all the partners of the partnership exclud- ing— (i) all imputation credits and FDP credits attached to dividends derived by the partners: all supplementary dividends derived by non-resi- dent partners of the partnership: (ii) partnership imputation credits is the total imputation credits attached to dividends and total supplementary dividends for the tax year derived by all partners of the partnership: (b) (c) (1) (2) (3) 1736 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LE 7B (d) partner’s supplementary dividend is the total supple- mentary dividends for the tax year derived by the person as a non-resident partner of the partnership.
Deﬁned in this Act: amount, assessable income, dividend, FDP credit, imput- ation credit, non-resident, supplementary dividend, tax credit, tax year Compare: 2004 No 35 s LB 1(1)(b), (4), (4A), (4B) LE 7 Credit transfer notices (1) (2) When this section applies This section applies in relation to a tax credit when a share supplier is given a credit transfer notice under section 30C of the Tax Administration Act 1994 by a share user under a share-lending arrangement.
Amount of reduction The person’s credit is limited to the amount shown in the credit transfer notice.
Deﬁned in this Act: amount, credit transfer notice, share-lending arrangement, share supplier, share user, tax credit Compare: 2004 No 35 s LB 2(1C) LE 7B Credit of RSCT for imputation credit (1) (2) Retirement scheme contributions A retirement scheme contributor who attaches an imputation credit to a retirement scheme contribution for a person in an income year has a tax credit for the corresponding tax year of an amount equal to the lesser of— (a) (b) the amount of the imputation credit: the liability of the contributor for RSCT on the contri- bution.
When credit more than liability If the amount of the imputation credit is more than the liability of the contributor for RSCT on the contribution,— (a) the amount of the excess is treated as an imputation credit attached to a distribution from the contributor to the person; and 1737 Part L s LE 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the person responsible for withholding the RSCT must, within 30 days of the contribution, notify the person of the amount of the excess credit.
Deﬁned in this Act: amount, imputation credit, income year, notify, retirement scheme contribution, retirement scheme contributor, RSCT, tax credit, tax year Compare: 2004 No 35 s LB 3 Section LE 7B: inserted, on 1 April 2008, by section 442 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
LE 8 Application of imputation ratio (1) (2) When this section applies This section applies when a person who has a tax credit under section LE 1 receives an imputation credit attached to a divi- dend, and the dividend has an imputation ratio greater than the maximum permitted ratio calculated under section OA 18 (Calculation of maximum permitted ratios).

Section OZ 10 (Modifying ratios for imputation credits and FDP credits) may apply to modify this section.
Amount of reduction The person’s credit is reduced by an amount equal to the amount by which the credit is greater than the maximum permitted ratio.

Deﬁned in this Act: amount, dividend, imputation credit, imputation ratio, maximum permitted ratio, tax credit Compare: 2004 No 35 s LB 1(1)(c) Section LE 8(1): amended, on 1 April 2008, by section 443 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LE 9 Application of combined imputation and FDP ratio When this section applies This section applies when— (a) a person who has a tax credit under section LE 1 re- ceives an imputation credit and an FDP credit attached to a dividend; and an excess credit amount arises in relation to the divi- dend; and the FDP credit is equal to or less than the excess credit amount.
(b) (c) (1) 1738 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LE 10 (2) (3) Amount of reduction The person’s credit for the dividend is reduced by an amount calculated using the formula— excess credit amount for dividend − attached FDP credit.

Relationship with section OZ 10 Section OZ 10 (Modifying ratios for imputation credits and FDP credits) may apply to modify this section.
Deﬁned in this Act: amount, combined imputation and FDP ratio, dividend, excess credit amount, FDP credit, imputation credit, tax credit Compare: 2004 No 35 s LB 1(1)(e), (5) Section LE 9(3) heading: added, on 1 April 2008, by section 444 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LE 9(3): added, on 1 April 2008, by section 444 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
LE 10 When income tax unpaid (1) (2) (3) When this section applies This section applies when— (a) (b) (c) a person has a tax credit under section LE 1 and an imputation credit is attached to a dividend; and the dividend is paid by a company that has a debit bal- ance in its imputation credit account at the end of the tax year; and the company has not paid further income tax by the due date in section OB 65(3) (Further income tax for ICA closing debit balance).
Amount of reduction The Commissioner may reduce the person’s credit by an amount equal to their proportion of the unpaid amount under subsection (1)(c).

When failure to pay remedied To the extent to which a company remedies the failure after the due date, this section does not apply.
Deﬁned in this Act: amount, Commissioner, company, dividend, further in- come tax, imputation credit, imputation credit account, pay, tax credit, tax year Compare: 2004 No 35 ss LB 1(1)(h), LB 2(5), (6) 1739 Part L s LE 11 Income Tax Act 2007 Reprinted as at 1 January 2010 LE 11 Evidential requirements If a person who has a tax credit under section LE 1 does not meet the evidential requirements of section 78D of the Tax Administration Act 1994, the person’s credit may be reduced.
Deﬁned in this Act: tax credit Compare: 2004 No 35 ss LB 1(1)(f), LB 2(4) Subpart LF—Tax credits for foreign dividend payment (FDP) credits LF 1 Tax credits for FDP credits Amount of credit A person whose assessable income for an income year in- cludes a foreign dividend payment (FDP) credit has a tax credit equal to the amount of the FDP credit for the tax year corres- ponding to the income year.

Section OZ 11 (Tax credits for imputation credits and FDP credits) may apply to modify this section.
Exclusion For a returning share transfer, a share user does not have a tax credit for an imputation credit attached to a dividend derived in a period in which they hold a share acquired under the transfer.

However, a person providing a share under a returning share transfer is allowed a tax credit for the amount of an imputation credit recorded in the credit transfer notice, seesection LF 5.
When amount adjusted The amount of the person’s credit in subsection (1) may be reduced or increased if any of sections LF 2 to LF 9 apply.

Portfolio tax rate entities and investors in entities For a portfolio tax rate entity and an investor in a portfolio tax rate entity, the amount of a tax credit is limited to the extent allowed under subpart HL (Portfolio investment entities).
Arrangements for tax advantage A person’s tax credit under this section is extinguished if either of the following sections apply: (a) section GB 36 (Reconstruction of imputation arrange- ments to obtain tax advantage): (1) (2) (3) (4) (5) 1740 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LF 3 (6) (b) section GB 38 (When sections GB 35 to GB 37 apply to consolidated groups).
Relationship of sections in this subpart Sections LF 1 to LF 7, LF 9, and LF 10 do not apply in relation to a non-resident or a person who receives exempt income as set out in section LF 8.
Deﬁned in this Act: amount, assessable income, corresponding income year, credit transfer notice, dividend, exempt income, FDP credit, imputation credit, income year, investor, non-resident, portfolio tax rate entity, returning share transfer, share, share user, tax year Compare: 2004 No 35 ss LB 1(1)(l), LD 8(1), (1B), (1C) Section LF 1(1): amended, on 1 April 2008, by section 445 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LF 2 Trustees for minor beneﬁciaries (1) (2) When this section applies This section applies when a person who has a tax credit under section LF 1 is the trustee of a trust for a minor who derives beneﬁciary income from the trust.

Trustee treated as beneﬁciary To the extent to which section HC 7(2) (Trustee income) ap- plies, the person is treated as deriving the minor’s beneﬁciary income as a beneﬁciary.
Deﬁned in this Act: beneﬁciary income, minor, tax credit, trustee Compare: 2004 No 35 ss LB 1(1)(ab), LB 1A LF 3 Beneﬁciaries of trusts (1) (2) When this section applies This section applies when a person who has a tax credit under section LF 1 is the beneﬁciary of a trust and, in that capacity, derives a dividend with an FDP credit attached.
Limitation on amount of credit The person’s tax credit is limited to an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (3) 1741 Part L s LF 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) (c) (d) person’s distributions is the total distributions for the tax year made to the person in their capacity as beneﬁ- ciary of the trust: trust distributions is the total distributions for the tax year made to all beneﬁciaries of the trust in their cap- acity as beneﬁciaries, and includes all supplementary dividends paid to them: total beneﬁciary credits is the total FDP credits at- tached to dividends and total supplementary dividends for the tax year paid to all beneﬁciaries of the trust in their capacity as beneﬁciaries: person’s supplementary dividend is the total supple- mentary dividends for the tax year paid to the person in their capacity as beneﬁciary of the trust.
Deﬁned in this Act: amount, distribution, dividend, FDP credit, supplementary dividend, tax credit, tax year Compare: 2004 No 35 s LB 1(1)(a), (2), (3), (3A) LF 4 Partners in partnerships When this section applies This section applies when a person who has a tax credit under section LF 1 is a partner in a partnership and, through the part- nership, derives a dividend with an FDP credit attached.
Limitation on amount of credit The person’s credit is limited to an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) partner’s income is the total assessable income of the person for the tax year derived as a partner of the part- nership excluding— (i) an imputation credit or FDP credit attached to a dividend derived by the person: a supplementary dividend derived by the person as a non-resident partner of the partnership: (ii) (1) (2) (3) 1742 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LF 6 (b) (c) (d) partnership income is the total assessable income for the tax year of all the partners of the partnership exclud- ing— (i) all imputation credits and FDP credits attached to any dividends derived by the partners: all supplementary dividends derived by non-resi- dent partners of the partnership: (ii) partnership FDP credits is the total FDP credits at- tached to dividends and total supplementary dividends derived for the tax year by all partners of the partner- ship: partner’s supplementary dividend is the total supple- mentary dividends for the tax year derived by the person as a non-resident partner of the partnership.
Deﬁned in this Act: amount, assessable income, dividend, FDP credit, imput- ation credit, non-resident, supplementary dividend, tax credit, tax year Compare: 2004 No 35 s LB 1(1)(b), (4), (4A), (4B) LF 5 Credit transfer notices (1) (2) When this section applies This section applies when a share supplier is given a credit transfer notice under section 30C of the Tax Administration Act 1994 by a share user under a share-lending arrangement.
Amount of reduction The share supplier’s tax credit is limited to the amount of FDP shown in the credit transfer notice.
Deﬁned in this Act: amount, credit transfer notice, FDP, share-lending arrange- ment, share supplier, share user, tax credit Compare: 2004 No 35 s LD 8(1C) LF 6 Application of FDP ratio (1) When this section applies This section applies when a person who has a tax credit under section LF 1 receives an FDP credit attached to a dividend, and the dividend has an FDP ratio greater than the maximum permitted ratio calculated under section OA 18 (Calculation of maximum permitted ratios).
Section OZ 10 (Modifying ratios for imputation credits and FDP credits) may apply to modify this section.

1743 Part L s LF 7 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Amount of reduction The person’s credit is reduced by an amount equal to the amount by which the credit is greater than the maximum permitted ratio.
Deﬁned in this Act: amount, dividend, FDP credit, FDP ratio, maximum per- mitted ratio, tax credit Compare: 2004 No 35 s LB 1(1)(d) Section LF 6(1): amended, on 1 April 2008, by section 446 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LF 7 Application of combined imputation and FDP ratio When this section applies This section applies when— (a) a person who has a tax credit under section LF 1 re- ceives an imputation credit and an FDP credit attached to a dividend; and an excess credit amount arises in relation to the divi- dend; and the FDP credit is equal to or less than the excess credit amount.
(b) (c) Amount of reduction The person’s credit is reduced by an amount calculated using the formula— excess credit amount for dividend − FDP credit attached.

Relationship with section OZ 10 Section OZ 10 (Modifying ratios for imputation credits and FDP credits) may apply to modify this section.
Deﬁned in this Act: amount, dividend, excess credit amount, FDP credit, im- putation credit, tax credit Compare: 2004 No 35 s LB 1(1)(e), (5) Section LF 7(3) heading: added, on 1 April 2008, by section 447 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LF 7(3): added, on 1 April 2008, by section 447 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
(1) (2) (3) 1744 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LF 9 LF 8 Credits for persons who are non-resident or who receive exempt income (1) (2) (3) (4) (5) When this section applies This section applies for a tax year when a person is a share- holder of a company resident in New Zealand that pays a divi- dend to the person with an FDP credit attached and the person is non-resident.
Amount of tax credit The person has a tax credit for the tax year equal to the amount of the FDP credit attached to the dividend.

When amount altered The amount of the person’s credit in subsection (2) may be reduced or increased to the extent to which— (a) (b) any of sections LF 2 to LF 7 apply: an FDP credit is used for a tax year to reduce the per- son’s liability under section RF 14 (Treatment of FDP credits).
Arrangements for tax advantage A person’s tax credit under this section is extinguished if sec- tions GB 35 (Imputation arrangements to obtain tax advan- tage) and GB 36 (Reconstruction of imputation arrangements to obtain tax advantage) apply.

Refunds To obtain a refund of the credit, the person must— (a) ask the Commissioner for the refund after the 31 May that follows the end of the tax year; and (b) meet the requirements of section 78D of the Tax Ad- ministration Act 1994.
Deﬁned in this Act: amount, Commissioner, company, dividend, exempt in- come, FDP credit, non-resident, pay, resident in New Zealand, shareholder, tax credit, tax year Compare: 2004 No 35 ss LB 1(1)(d), (l), LD 9 LF 9 When income tax unpaid (1) When this section applies This section applies when— (a) a person has a tax credit under section LF 1 and an FDP credit is attached to a dividend; and 1745 Part L s LF 10 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) the dividend is paid by a company that has a debit bal- ance in its FDP account at the end of the tax year; and the company has not paid further income tax by the due date referred to in section OB 65(3) (Further income tax for ICA closing debit balance).
Amount of reduction The Commissioner may reduce the person’s credit by an amount equal to their proportion of the unpaid amount under subsection (1)(c).

When failure to pay remedied To the extent to which a company remedies the failure after the due date, this section does not apply.
Deﬁned in this Act: amount, Commissioner, company, dividend, FDP account, FDP credit, further income tax, pay, tax credit, tax year Compare: 2004 No 35 ss LB 1(1)(i), LD 8(4), (5) (2) (3) LF 10 Evidential requirements If a person who has a tax credit under section LF 1 does not meet the evidential requirements of section 78D of the Tax Administration Act 1994, the person’s credit may be reduced.
Deﬁned in this Act: tax credit Compare: 2004 No 35 ss LB 1(1)(g), LD 8(3) Subpart LH—Tax credits for expenditure on research and development Subpart LH: inserted, on 1 April 2008, by section 448 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

LH 1 Who this subpart applies to [Repealed] Section LH 1: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section LH 1(1)(ab): inserted (with effect on 1 April 2008), on 6 October 2009, by section 330(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LH 1(2)(ab): inserted (with effect on 1 April 2008), on 6 October 2009, by section 330(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1746 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LH 2 Section LH 1(2)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 330(3)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LH 1(2)(c): amended (with effect on 1 April 2008), on 6 October 2009, by section 330(3)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LH 1(3) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 330(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LH 1(3): added (with effect on 1 April 2008), on 6 October 2009, by section 330(4) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section LH 1 list of deﬁned terms excluded income: inserted (with effect on 1 April 2008), on 6 October 2009, by section 330(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LH 1 list of deﬁned terms group of companies: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 330(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LH 1 list of deﬁned terms New Zealand resident: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 330(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LH 1 compare note: repealed (with effect on 1 April 2008), on 6 October 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LH 2 Tax credits relating to expenditure on research and development [Repealed] Section LH 2: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

Section LH 2(7) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 331(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LH 2(7): added (with effect on 1 April 2008), on 6 October 2009, by section 331(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section LH 2 compare note: repealed (with effect on 1 April 2008), on 6 October 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1747 Part L s LH 3 Income Tax Act 2007 Reprinted as at 1 January 2010 LH 3 Requirements [Repealed] Section LH 3: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

Section LH 3(1)(a)(ib): inserted (with effect on 1 April 2008), on 6 October 2009, by section 332(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LH 3(6) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 332(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LH 3(6): added (with effect on 1 April 2008), on 6 October 2009, by section 332(2) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
inserted (with effect on 1 April Section LH 3 list of deﬁned terms control: 2008), on 6 October 2009, by section 332(3) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LH 3 list of deﬁned terms group of companies: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 332(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LH 3 list of deﬁned terms New Zealand resident: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 332(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LH 3 compare note: repealed (with effect on 1 April 2008), on 6 October 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LH 4 Calculation of amount of credit [Repealed] Section LH 4: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

Section LH 4 compare note: repealed (with effect on 1 April 2008), on 6 October 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LH 5 Adjustments to eligible expenditure [Repealed] Section LH 5: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

Section LH 5(4)(c): substituted (with effect on 1 April 2008), on 6 October 2009, by section 333(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1748 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LH 7 Section LH 5(4)(d): inserted (with effect on 1 April 2008), on 6 October 2009, by section 333(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LH 5 list of deﬁned terms employee: inserted (with effect on 1 April 2008), on 6 October 2009, by section 333(2) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LH 5 list of deﬁned terms employment income: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 333(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LH 5 list of deﬁned terms shareholder-employee: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 333(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LH 5 compare note: repealed (with effect on 1 April 2008), on 6 October 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

LH 6 Research and development activities outside New Zealand [Repealed] Section LH 6: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section LH 6 compare note: repealed (with effect on 1 April 2008), on 6 October 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LH 7 Research and development activities and related terms (1) Research and development activities In this subpart, research and development activities of a per- son are— (a) systematic, investigative, and experimental activities that are performed for the purposes of acquiring new knowledge or creating new or improved materials, products, devices, processes, or services and that— (i) are intended to achieve an advance in science or technology by resolving scientiﬁc or technologi- cal uncertainty: (ii) involve an appreciable element of novelty: other activities that are wholly or mainly for the purpose of, required for, and integral to, the performing of the activities referred to in paragraph (a).
(b) 1749 Part L s LH 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) (5) Systematic, investigative, and experimental activities In this subpart, systematic, investigative, and experimental activities of a person are activities that— (a) are planned activities directed towards a particular purpose and following a logical progression of work involving hypothesis, experiment, observation, and evaluation; and are not excluded under schedule 21, part C (Expenditure and activities related to research and development).
(b) Scientiﬁc or technological uncertainty In this subpart, scientiﬁc or technological uncertainty means uncertainty concerning the scientiﬁc or technological possibil- ity of a thing, or the achievement of the thing in practice, cre- ated by an absence of relevant knowledge from the knowledge that is publicly available or deducible by a competent profes- sional working in the ﬁeld.
Novelty In this subpart, novelty means a development of technology or a new use of existing technology, by comparison with the knowledge of the technology that is publicly available on a reasonably accessible worldwide basis.

Technology In this subpart, technology means the practical application of scientiﬁc principles and knowledge.
Deﬁned in this Act: novelty, research and development activities, scientiﬁc or technological uncertainty, systematic, investigative, and experimental activ- ities, technology Section LH 7: inserted, on 1 April 2008, by section 448 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section LH 7 compare note: repealed (with effect on 1 April 2008), on 6 October 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

LH 8 Orders in Council [Repealed] Section LH 8: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section LH 8 compare note: repealed (with effect on 1 April 2008), on 6 October 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

1750 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LH 13 LH 9 Internal software development: general [Repealed] Section LH 9: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section LH 9 compare note: repealed (with effect on 1 April 2008), on 6 October 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

LH 10 Internal software development: no associated internal software developer [Repealed] Section LH 10: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section LH 10 compare note: repealed (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

LH 11 Internal software development: associated internal software developer with same income year [Repealed] Section LH 11: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section LH 11 compare note: repealed (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

LH 12 Internal software development: associated internal software developer with different income year [Repealed] Section LH 12: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section LH 12 compare note: repealed (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

LH 13 Internal software development: limit [Repealed] Section LH 13: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section LH 13 compare note: repealed (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

1751 Part L s LH 14 Income Tax Act 2007 Reprinted as at 1 January 2010 LH 14 Treatment of depreciation loss for certain depreciable property [Repealed] Section LH 14: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section LH 14 compare note: repealed (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

LH 14B Recovery of overpaid tax credit (1) (2) When this section applies This section applies when the Commissioner considers the amount of a tax credit under this subpart that is used under sec- tions LA 2, LA 6(2), or LH 2(6) (which relate to tax credits) for a tax year is more than the proper amount.
Recovery of overpayment The Commissioner may recover the excess as if it were income tax payable by the person.

Deﬁned in this Act: amount, Commissioner, income tax, pay, tax credit, tax year Section LH 14B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 334(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LH 15 Listed research providers [Repealed] Section LH 15: repealed, on 1 October 2009, by section 19(1)(d) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

Section LH 15 compare note: repealed (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LH 16 Industry research co-operatives [Repealed] Section LH 16: repealed, on 1 April 2009, by section 19(1)(c) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

Section LH 16 compare note: repealed (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1752 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LH 17 LH 17 Some deﬁnitions In this subpart,— associated internal software developer, for a person (per- son A) who is performing, or having another person perform, internal software development at a time, means another per- son— (a) who is performing, or having another person perform, internal software development at the time; and for whom the internal software development controller is the same as the internal software development con- troller of person A (b) for a person, means a internal software development, research and development activity of developing software with— (a) (b) (ii) a purpose of having the software used in— (i) the internal administration of business activities of the person or of another person associated with them: providing services to customers of the person or another person associated with them whose main reason for using the services is to obtain a service other than the use of the person’s computer tech- nology or software: the main purpose that is neither— (i) selling, renting, licensing, hiring, or leasing the software by the person to customers of which 2 or more are not associated with the person nor with each other: including the software as an integral part of an electrical or mechanical device for which the software is developed and that has for the person the main purpose of being sold, rented, licensed, hired, or leased to customers as part of the per- son’s business (ii) internal software development
 controller, for a person (per- son A) who is performing, or having another person perform, 1753 Part L s LJ 1 Income Tax Act 2007 Reprinted as at 1 January 2010 internal software development, means a group of 1 or more persons— (a) having the power to govern, directly or indirectly, the ﬁnancial and operating policies of person A to obtain beneﬁts from person A’s activities; and having no other person or persons with the power to govern, directly or indirectly, the ﬁnancial and oper- ating policies of the group to obtain beneﬁts from the group’s activities (b) internal software development group, for an internal soft- ware development controller (the controller) and a tax year, means a group of entities of which each entity is a member at a time, in the entity’s income year corresponding to the tax year, when— (a) the controller is the internal software development con- troller of the entity; and the entity is performing, or having another person per- form, internal software development; and the entity has an associated internal software developer.
(c) Deﬁned in this Act: associated person, deduction, income year, internal soft- ware development, internal software development controller, internal software development group, research and development activities, tax year (b) Section LH 17: inserted, on 1 April 2008, by section 448 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section LH 17 compare note: repealed (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 329 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Subpart LJ—Tax credits for foreign income tax LJ 1 What this subpart does (1) When tax credits allowed This subpart provides the rules for dividing assessable income from foreign-sourced amounts into segments and allows a tax credit for foreign income tax paid in relation to a segment of that income.
Limited application of rules The rules in this subpart apply only when— (2) 1754 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LJ 1 (3) (4) (5) (6) (a) (b) a person resident in New Zealand derives assessable income that is not derived from New Zealand; and foreign income tax is not paid in a country or territory listed in schedule 27 (Countries and types of income with unrecognised tax) to the extent to which the foreign income tax is paid on the types of income listed in the schedule.
When treated as assessable income [Repealed] [Repealed] Source of dividends If a company is not resident in New Zealand, and for the pur- poses of a law of another territory in relation to which a double tax agreement has been made is resident in that territory, and the law imposes foreign tax, a dividend paid by the company is treated as being derived from a source in that other territory for the purposes of the double tax agreement.
Double tax agreements This subpart and sections BH 1 (Double tax agreements) and CD 19(1) (Foreign tax credits and refunds linked to dividends) and section 88 of the Tax Administration Act 1994 as far as they are applicable, and modiﬁed as necessary, apply for the purposes of section LJ 2, as if that section were a double tax agreement.
Relationship with section YD 5 Section YD 5 (Apportionment of income derived partly in New Zealand) applies to determine how an amount is appor- tioned to sources outside New Zealand.
Deﬁned in this Act: amount, assessable income, attributing interest, company, derived from New Zealand, dividend, double tax agreement, FIF, foreign in- come tax, foreign investment fund, foreign-sourced amount, foreign tax, in- come, pay, resident in New Zealand, tax credit Compare: 2004 No 35 ss LC 1(1)–(5), LC 14(1), LC 14A Section LJ 1(3) heading: repealed (with effect on 1 April 2008), on 6 October 2009, pursuant to section 335(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LJ 1(3): repealed (with effect on 1 April 2008), on 6 October 2009, by section 335(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

1755 Part L s LJ 2 Income Tax Act 2007 Reprinted as at 1 January 2010 Section LJ 1(6) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 335(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LJ 1(6): added (with effect on 1 April 2008), on 6 October 2009, by section 335(2) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

LJ 2 Tax credits for foreign income tax (1) (2) (3) (4) Amount of credit A person described in section LJ 1(2)(a) has a tax credit for a tax year for an amount of foreign income tax paid on a segment of foreign-sourced income, determined as if the segment were the net income of the person for the tax year.
The amount of the New Zealand tax payable is calculated under section LJ 5.

Limitation on amount of credit The amount of the person’s credit in subsection (1) must not be more than the amount of New Zealand tax payable by the per- son in relation to the segment calculated under section LJ 5(2), modiﬁed as necessary under section LJ 5(4).

Amount adjusted The amount of the person’s credit in subsection (1) may be reduced or increased if either section LJ 6 or LJ 7 applies.
When person both resident in New Zealand and another country A person described in section LJ 1(2)(a) who has, because they are a citizen or resident of, or are domiciled in, a foreign country, paid foreign income tax on their assessable income, has a credit under subsection (1).

However, the amount of the credit is limited to the amount of foreign income tax that would have been paid in the foreign country if the person were treated as not a citizen or resident of, or domiciled in, that foreign country.
(5) Portfolio tax rate entities and investors in entities For a portfolio tax rate entity and an investor in a portfolio tax rate entity, the amount of a tax credit is limited to the extent allowed under subpart HL (Portfolio investment entities).
1756 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LJ 2 (6) (7) When subsection (7) applies Subsection (7) applies to a person who derives an amount from an attributing interest in a FIF when the amount is treated as not being income under section EX 59(2) (Codes: comparative value method, deemed rate of return method, fair dividend rate method, and cost method).

Tax credit The person has a tax credit under this subpart for foreign in- come tax paid on or withheld in relation to the amount.
The calculation of the maximum amount of the tax credit is made under section LJ 5(2), modiﬁed so that the item segment in the formula is the amount of FIF income from the attributing interest that the person derives in the period referred to in sec- tion EX 59(2).
Deﬁned in this Act: amount, assessable income, attributing interest, FIF, FIF income, foreign income tax, income, income tax liability, investor, net income, New Zealand, New Zealand tax, pay, portfolio tax rate entity, segment of for- eign-sourced income, tax credit, tax year Compare: 2004 No 35 ss LC 1(1), (1B), (1C), LC 2 Section LJ 2(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 336(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LJ 2(6) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 336(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2(6): added (with effect on 1 April 2008), on 6 October 2009, by section 336(3) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section LJ 2(7) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 336(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2(7): added (with effect on 1 April 2008), on 6 October 2009, by section 336(3) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section LJ 2 list of deﬁned terms attributing interest: inserted (with effect on 1 April 2008), on 6 October 2009, by section 336(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2 list of deﬁned terms FIF: inserted (with effect on 1 April 2008), on 6 October 2009, by section 336(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LJ 2 list of deﬁned terms FIF income: inserted (with effect on 1 April 2008), on 6 October 2009, by section 336(5) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1757 Part L s LJ 3 Income Tax Act 2007 Reprinted as at 1 January 2010 Section LJ 2 list of deﬁned terms income: inserted (with effect on 1 April 2008), on 6 October 2009, by section 336(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LJ 2 list of deﬁned terms tax credit: inserted (with effect on 1 April 2008), on 6 October 2009, by section 336(5) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

LJ 3 Meaning of foreign income tax For the purposes of this Part, foreign income tax means an amount of income tax of a foreign country.
Deﬁned in this Act: amount, income tax Compare: 2004 No 35 s LC 1(1) Section LJ 3: substituted (with effect on 1 April 2008), on 6 October 2009, by section 337 of the Taxation (International Taxation, Life Insurance, and Remed- ial Matters) Act 2009 (2009 No 34).

LJ 4 Meaning of segment of foreign-sourced income For the purposes of this Part, a person has a segment of for- eign-sourced income equal to an amount of assessable income derived from 1 foreign country that comes from 1 source or is of 1 nature.
Deﬁned in this Act: amount, assessable income Compare: 2004 No 35 s LC 14(1) LJ 5 Calculation of New Zealand tax What this section does This section provides the rules for calculating the amount of New Zealand tax that relates to a segment of foreign-sourced income of a person.
Calculation for single segment If the person has a notional income tax liability of more than zero, the amount of New Zealand tax relating to the segment is calculated using the formula— Deﬁnition of items in formula In the formula in subsection (2),— (a) segment is the amount of the segment of for- eign-sourced income: (1) (2) (3) 1758 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LJ 5 (b) (c) (d) person’s deductions is the amount of the person’s de- ductions for the tax year attributable to the segment of foreign-sourced income: person’s net income is the person’s net income for the tax year under section BC 4(1) to (3) (Net income and net loss): notional liability is the person’s notional income tax liability under subsection (5).
Modiﬁcation to results of formula for single segment The amount referred to in subsection (2) is modiﬁed if the net income that the person would have if their only income were from their segments of foreign-sourced income for the tax year is greater than their actual net income for the tax year.
The result of the calculation in subsection (2) is adjusted for each segment by multiplying the individual amounts by the following ratio: Deﬁnition of item in formula In the formula in subsection (4), NZ tax is the amount of New Zealand tax that would be calculated under subsection (2) if that subsection applied to all income of the person from all sources.
Person’s notional income tax liability For the purposes of this section, a person’s notional income tax liability for a tax year is calculated using the formula— (person’s net income − losses) × tax rate.
Deﬁnition of items in formula In the formula in subsection (5),— (a) (b) person’s net income is the person’s net income for the tax year: losses— (i) is the amount of the loss balance carried forward to the tax year that the person must subtract from their net income under section IA 4(1)(a) (Using loss balances carried forward to tax year): (4) (4B) (5) (6) 1759 Part L s LJ 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) must be no more than the amount of the person’s net income: (c) tax rate is the basic rate of income tax set out in sched- ule 1, part A (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts).
Deﬁned in this Act: amount, deduction, income tax, income tax liability, loss balance, net income, New Zealand, New Zealand tax, segment of for- eign-sourced income, tax loss component, tax year Compare: 2004 No 35 s LC 14 Section LJ 5(4) formula: amended (with effect on 1 April 2008), on 6 October 2009, by section 338(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LJ 5(4B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 338(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 5(4B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 338(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LJ 5(6)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 338(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 5(6)(c): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section LJ 5 list of deﬁned terms New Zealand: inserted (with effect on 1 April 2008), on 6 October 2009, by section 338(4) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

LJ 6 Taxable distributions and NRWT rules When this section applies This section applies when a person who is a beneﬁciary of a trust and resident in New Zealand derives a taxable distribu- tion in their capacity as beneﬁciary of the trust.
When credit not allowed The person is not allowed a tax credit in relation to any foreign income tax paid on the taxable distribution unless the tax has substantially the same nature as non-resident withholding tax (NRWT).
Amount of credit The person’s tax credit is equal to an amount calculated using the formula— (1) (2) (3) 1760 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LJ 7 (4) Deﬁnition of items in formula In the formula,— (a) (b) (c) (b) person’s taxable distribution is the amount of the tax- able distribution derived by the person in their capacity as beneﬁciary of the trust, including a payment of tax that meets the requirements of subsection (2): total distribution is the total amount of the distribution derived by the person in their capacity as beneﬁciary of the trust, including a payment of tax that meets the requirements of subsection (2): foreign tax paid is the payment of tax that meets the requirements of subsection (2).
Deﬁned in this Act: amount, distribution, foreign income tax, non-resident withholding tax, NRWT, NRWT rules, pay, resident in New Zealand, tax credit, taxable distribution Compare: 2004 No 35 s LC 1(2) LJ 7 Repaid foreign tax: effect on income tax liability (1) (2) Who this section applies to This section applies to a person who has— (a) paid an amount of foreign income tax, or in relation to whom an amount of foreign income tax has been paid, on a segment of foreign-sourced income in relation to which they are entitled to a tax credit under section LJ 2; and received a refund, amount, or beneﬁt (the refund) de- termined directly or indirectly by reference to some or all of the payment of foreign income tax.
When refund received before assessment If the person receives the refund before they assess their in- come tax liability for a tax year, the amount of the tax credit for the foreign income tax paid is reduced by the lesser of— (a) (b) the amount of the refund: the amount of New Zealand tax payable on the foreign- sourced income calculated under section LJ 5.
1761 Part L s LJ 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) When refund received after assessment If the person receives the refund after they have assessed their income tax liability for a tax year, have used an amount of foreign tax credit in satisfying that liability, and have not taken the refund into account in that assessment, the person is liable to pay the Commissioner the lesser of— the amount of the refund: (a) the amount of New Zealand tax payable on the foreign (b) income calculated under section LJ 5.
Date for payment In subsection (3), the date for payment is the later of— the date on which the person receives the refund: (a) 30 days after the date on which the person’s return of (b) income for the tax year is ﬁled.

Associated persons For the purposes of this section, the refund is treated as re- ceived by the person, whether it is received by the person, a person who paid the foreign income tax, or a person associated with either of them.
Deﬁned in this Act: amount, associated person, Commissioner, foreign income tax, income tax liability, New Zealand, New Zealand tax, pay, return of income, segment of foreign-sourced income, tax credit, tax year, tax year Compare: 2004 No 35 ss LC 1(3A), (3B), LC 3 Section LJ 7: substituted (with effect on 1 April 2008), on 6 October 2009, by section 339(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LJ 8 Repaid foreign tax: effect on FDP liability Who this section applies to This section applies to a person who receives a foreign divi- dend from a foreign dividend company, and the person or the company has— (a) paid an amount of foreign income tax, or in relation to whom an amount of foreign income tax has been paid or withheld; and received a refund, amount, or beneﬁt (the refund) de- termined directly or indirectly by reference to some or all of the payment of foreign income tax.
(b) (1) 1762 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LJ 8 (2) (3) (b) When refund received before calculation of FDP If the person or company receives the refund before the per- son calculates the amount of FDP payable under section RG 4 (Calculating amount of FDP) for a tax year, the formula is modiﬁed as follows: (a) if the refund relates to foreign withholding tax on the dividend, the item foreign tax is the amount by which the foreign withholding tax paid is more than the amount of the refund: if the refund relates to foreign income tax taken into ac- count in the item total tax paid in section LL 2(5) (Tax credits for underlying foreign tax) or the item tax with- held in section LL 6(3) (Foreign dividend company lower tier UFTCs), the foreign dividend company’s cal- culation of UFTC is modiﬁed as follows: (i) the item foreign tax paid is the amount by which the total income tax or foreign income tax paid by the foreign dividend company is more than the amount of the refund: the item tax withheld is the amount by which the tax withheld and paid in relation to the standard dividend is more than the amount of the refund.
(ii) When subsection (4) applies Subsection (4) applies if— (a) the person or company receives the refund after the per- son has calculated the amount of FDP payable for a tax year under section RG 4; and the person has taken the amount of foreign income tax paid or withheld into account in that calculation in the items foreign tax or underlying credit in section RG 4(1); and the person has not taken the refund into account in that calculation.
(b) (c) (4) When refund received after calculation of FDP The person must recalculate the FDP liability for the tax year and pay the difference to the Commissioner as FDP.
1763 Part L s LK 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (5) (6) Date for payment For the purposes of subsection (4), the date for payment is the later of— (a) (b) the date the person or company receives the refund: the date for payment of FDP to the Commissioner in relation to the foreign dividend received for which the recalculation is required.
Associated persons For the purposes of this section, the refund is treated as re- ceived by the person or company, whether it is received by the person or company, a person who paid or withheld the foreign income tax, or a person associated with any of them.
Deﬁned in this Act: amount, associated person, Commissioner, FDP, foreign dividend, foreign dividend company foreign income tax, income tax, pay, tax year Compare: 2004 No 35 ss LC 1(3A), (3B), LC 3 Section LJ 8: added (with effect on 1 April 2008), on 6 October 2009, by section 339(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Subpart LK—Tax credits relating to attributed controlled foreign company income Amounts of credits LK 1 Tax credits relating to attributed CFC income Amount of credit A person who has an amount of attributed CFC income for an income year has a tax credit for the tax year correspond- ing to the income year equal to the following amounts paid or payable in relation to the attributed CFC income: (a) an amount of income tax paid by the CFC from which the income is derived: an amount of tax withheld and paid on behalf of the CFC from which the income is derived: the amount of foreign income tax paid by the CFC from which the income is derived: the amount of foreign income tax paid by the person under legislation of another country or territory that is the equivalent of the international tax rules.
(b) (c) (d) (1) 1764 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LK 1 (2) (3) (4) (5) (6) Amount adjusted The amount of the person’s credit in subsection (1) may be reduced or increased if section LK 7 applies.
Limitation to quarantined amount The person’s use under section LA 2 (Satisfaction of income tax liability) of a credit referred to in subsection (1) is limited to the amount (the quarantined amount) that would be their income tax liability for the tax year if their only assessable income were attributed CFC income derived from a CFC resi- dent in the foreign country or territory referred to in subsection (1) in the accounting period in which the amount of tax giving rise to the credit was paid or payable.
Tax withheld In subsection (1), a payment of income tax or foreign income tax by the CFC includes a payment of an amount of tax with- held from income.
When subsection (7) applies Subsection (7) applies when— (a) (b) (c) a person has a credit under subsection (1) in relation to an amount of income tax or foreign income tax; and the credit has been used under section LA 2 (Satisfac- tion of income tax liability) or is carried forward under section LK 4; and the person has received a refund, amount, or beneﬁt (the refund) determined directly or indirectly by reference to some or all of the tax paid.
When refund received before assessment If the person receives the refund before they assess their in- come tax liability for a tax year, the amount of tax credit for the tax paid is reduced by the lesser of— the amount of the refund: (a) the amount of New Zealand tax payable on the foreign- (b) sourced income calculated under section LJ 5 (Calcula- tion of New Zealand tax).
(7) Credit repayable or extinguished The amount of the credit— (a) must be paid to the Commissioner if it has been used under section LA 2: 1765 Part L s LK 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) is extinguished, if it is carried forward under section LK 4.
When liability payable The liability under subsection (7)(a) is treated as income tax payable 30 days after the later of the following dates: (a) the date of the notice of assessment in relation to which the person has used the credit: the date on which the person who paid the tax, or a person associated with them, receives the refund.
(b) Associated persons For the purposes of subsections (5) to (8), the refund is treated as received by the person, whether it is received by the person, a person who paid the foreign income tax, or a person associ- ated with either of them.
Deﬁned in this Act: accounting period, amount, amount of tax, assessable in- come, assessment, associated person, attributed CFC income, CFC, Commis- sioner, controlled foreign company, corresponding income year, foreign in- come tax, income tax, income tax liability, income year, international tax rules, New Zealand tax, notice, NRWT, pay, quarantined amount, segment of for- eign-sourced income, tax credit, tax withheld, tax year Compare: 2004 No 35 s LC 4(1), (4) Section LK 1(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 340(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LK 1(3): amended (with effect on 30 June 2009), on 6 October 2009, by section 340(2)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LK 1(3): amended (with effect on 30 June 2009), on 6 October 2009, by section 340(2)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LK 1(5) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LK 1(5): added (with effect on 1 April 2008), on 6 October 2009, by section 340(3) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section LK 1(6) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LK 1(6): added (with effect on 1 April 2008), on 6 October 2009, by section 340(3) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
(8) (9) 1766 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LK 1 Section LK 1(7) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LK 1(7): added (with effect on 1 April 2008), on 6 October 2009, by section 340(3) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section LK 1(8) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LK 1(8): added (with effect on 1 April 2008), on 6 October 2009, by section 340(3) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section LK 1(9) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LK 1(9): added (with effect on 1 April 2008), on 6 October 2009, by section 340(3) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section LK 1 list of deﬁned terms assessment: inserted (with effect on 1 April 2008), on 6 October 2009, by section 340(4) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LK 1 list of deﬁned terms associated person: inserted (with effect on 1 April 2008), on 6 October 2009, by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LK 1 list of deﬁned terms Commissioner: inserted (with effect on 1 April 2008), on 6 October 2009, by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LK 1 list of deﬁned terms conduit tax relief: repealed (with effect on 30 June 2009), on 6 October 2009, by section 340(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LK 1 list of deﬁned terms CTR company: repealed (with effect on 30 June 2009), on 6 October 2009, by section 340(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LK 1 list of deﬁned terms international tax rules: inserted (with ef- fect on 1 April 2008), on 6 October 2009, by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LK 1 list of deﬁned terms New Zealand tax: inserted (with effect on 1 April 2008), on 6 October 2009, by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LK 1 list of deﬁned terms notice: inserted (with effect on 1 April 2008), on 6 October 2009, by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
1767 Part L s LK 2 Income Tax Act 2007 Reprinted as at 1 January 2010 Section LK 1 list of deﬁned terms NRWT: inserted (with effect on 1 April 2008), on 6 October 2009, by section 340(4) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LK 1 list of deﬁned terms segment of foreign-sourced income: in- serted (with effect on 1 April 2008), on 6 October 2009, by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LK 2 Calculation of amount of credit Amount of credit For the purposes of section LK 1(1), the amount of a tax credit for a tax year for a person is equal to an amount calculated using the formula— section EX 18 income interest × (tax paid − excluded foreign tax).
Deﬁnition of items in formula In the formula,— (a) section EX 18 income interest is the income interest of the person used to calculate attributed CFC income under section EX 18 (Formula for calculating attributed CFC income or loss) for the accounting period corres- ponding to the tax year: tax paid is the amount of income tax or foreign in- come tax paid or payable by the CFC for the account- ing period corresponding to the tax year, including an amount withheld by another person and paid or payable on behalf of the CFC: excluded foreign tax is an amount of foreign income tax paid in a country or territory listed in schedule 27 (Countries and types of income with unrecognised tax) to the extent to which the foreign income tax is paid on the types of income listed in the schedule.
(b) (c) Deﬁned in this Act: accounting period, amount, attributed CFC income, CFC, foreign income tax, income interest, income tax, pay, tax credit, tax year Compare: 2004 No 35 s LC 4(1)–(3) Section LK 2(2)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 341(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(1) (2) 1768 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LK 5 LK 3 Currency conversion If foreign income tax is paid or payable by a CFC in a cur- rency other than New Zealand currency, the amount must be converted into New Zealand currency by applying— (a) the close of trading spot exchange rate on the date when the income tax is paid or becomes payable; or the average of the close of trading spot exchange rates for the 15th day of each complete month that falls in the period to which the attributed CFC income relates.
Deﬁned in this Act: amount, attributed CFC income, CFC, close of trading spot exchange rate, foreign income tax, New Zealand, pay Compare: 2004 No 35 s LC 4(1) (b) Use of credits in later tax years LK 4 Use of remaining credits (1) (2) When this section applies This section applies for the purposes of section LA 5(2) (Treat- ment of remaining credits) when a person has a tax credit re- maining for a tax year after applying section LA 4(1) (When total tax credit more than income tax liability).
Amount carried forward The amount is carried forward to the next tax year as a credit carried forward.
Deﬁned in this Act: amount, tax credit, tax year Compare: 2004 No 35 s LC 4(4) LK 5 Companies’ credits carried forward (1) Company carrying credit forward A tax credit carried forward under section LK 4 may be carried forward to a later tax year only if, by treating the credit as a tax loss component to which sections IA 2 to IA 10 (which re- late to the treatment of tax losses) apply, those sections would allow the amount to be carried forward.
1769 Part L s LK 5B Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Timing For the purposes of this section, the credit is treated as a tax loss component arising on the last day of the income year cor- responding to the tax year for which the person has the credit.
Deﬁned in this Act: amount, company, corresponding income year, tax credit, tax loss component, tax year Compare: 2004 No 35 s LC 4(4)–(6) LK 5B Credits from tax year before ﬁrst affected year When this section applies This section applies when a person has a tax credit (the avail- able BE credit) that— (a) relates to a tax year before the ﬁrst tax year for which this section applies to the person; and relates to a CFC or FIF that is resident in a country (the jurisdiction) in which the credit arose; and is carried forward to a tax year (the conversion year) for which this section applies to the person.
(b) (c) What this section does In this section, subsection (3) gives the person an option that an available BE credit for a jurisdiction not be carried forward and subsections (4) to (7) give, for whichever of the 4 alterna- tive situations is otherwise relevant for the person,— (a) the amount of the available BE credit (the converted BE credit) that is— (i) treated as being converted into an amount re- ferred to in paragraph (b) in the conversion year; and not available to the person to be carried forward as available BE credit for a later tax year: the amount (the equivalent tax credit) of a tax credit that, for the purposes of the rest of this subpart, is treated as arising in relation to the jurisdiction in the conversion year.
(ii) (b) Option: tax credit not carried forward A person may choose by giving a notice in a form and at a time acceptable to the Commissioner that the available BE credit for a jurisdiction not be carried forward under this section.
(1) (2) (3) 1770 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LK 5B (4) (5) Person not resident group member: more jurisdictional BE income For a person who is not a resident group member and has jur- isdictional BE income for the conversion year that is greater than zero and greater than the person’s jurisdictional attributed income for the conversion year,— (a) the person’s converted BE credit in the conversion year is the lesser of— (i) the amount that would be the person’s income tax liability if the person’s only assessable income were the person’s jurisdictional BE income for the conversion year: the person’s available BE credit for the conver- sion year: (ii) (b) the person’s equivalent tax credit in the conversion year is the lesser of— (i) the amount that would be the person’s income tax liability if the person’s only assessable in- come were the person’s jurisdictional attributed income for the conversion year: the amount calculated by dividing the person’s available BE credit for the conversion year by the person’s jurisdictional income ratio for the conversion year.
(ii) Person not resident group member: more jurisdictional attributed income For a person who is not a resident group member and has jur- isdictional attributed income for the conversion year that is greater than or equal to zero and greater than or equal to the person’s jurisdictional BE income for the conversion year,— the person’s converted BE credit for the conversion year (a) is the lesser of— (i) the person’s available BE credit for the conver- sion year: the amount that would be the person’s income tax liability if the person’s only assessable in- come were the person’s jurisdictional attributed income for the conversion year: (ii) 1771 Part L s LK 5B Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the person’s equivalent tax credit is equal to the person’s converted BE credit for the conversion year.
Resident group member: more jurisdictional BE income For a person who is a resident group member for a wholly- owned group of companies and has jurisdictional BE income for the conversion year that is greater than zero and greater than the person’s jurisdictional attributed income for the con- version year,— (a) the person’s converted BE credit for the conversion year is the lesser of— (i) (ii) the person’s available BE credit for the conver- sion year: the amount that would be the person’s income tax liability if the person’s only assessable income were the greater of the person’s jurisdictional BE income for the conversion year and the amount calculated by multiplying the group’s jurisdic- tional income ratio for the conversion year by the person’s jurisdictional attributed income for the conversion year: (b) the person’s equivalent tax credit is the amount calcu- lated by dividing the person’s converted BE credit for the conversion year by the group’s jurisdictional income ratio for the conversion year.
Resident group member: more jurisdictional attributed income For a person who is a resident group member and has jurisdic- tional attributed income for the conversion year that is greater than or equal to zero and greater than or equal to the person’s jurisdictional BE income for the conversion year,— (a) the person’s converted BE credit for the conversion year is the lesser of— (i) the person’s available BE credit for the conver- sion year: the amount that would be the person’s income tax liability if the person’s only assessable in- come were the person’s jurisdictional attributed income for the conversion year multiplied by the (ii) (6) (7) 1772 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LK 6 (b) group’s jurisdictional income ratio for the con- version year: the person’s equivalent tax credit is equal to the amount calculated by dividing the person’s converted tax credit for the conversion year by the group’s jurisdictional in- come ratio for the conversion year.
(8) Option to determine jurisdictional BE income from accounts In determining the jurisdictional BE income of a person or wholly-owned group, the person or group may choose to use, instead of the branch equivalent income or loss of a CFC, the proﬁt or loss of the CFC before taxation given by accounts— complying with generally accepted accounting practice (a) in New Zealand or an equivalent standard for the consis- tent and undistorted reporting of net proﬁts in the coun- try in which the accounts are prepared; and audited by an accountant who is— (i) (b) a chartered accountant or an accountant of equivalent professional standard in the country in which the accounts are prepared; and independent of the CFC and the person or wholly-owned group; and (ii) (c) are given an unqualiﬁed opinion or an opinion of equivalent standard in the country in which the ac- counts are prepared.
Deﬁned in this Act: attributed CFC income, attributed CFC loss, branch equiva- lent income, branch equivalent loss, CFC, group of companies, income inter- est, jurisdictional attributed income, jurisdictional BE income, jurisdictional in- come ratio, New Zealand resident, resident group member, tax year, wholly- owned group, wholly-owned group of companies Section LK 5B: inserted (with effect on 30 June 2009), on 6 October 2009, by section 342(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LK 6 Use of credits by group companies (1) When this section applies This section applies when a company (company A) in a group of companies has a tax credit under section LK 1 in relation to an income interest in a CFC (company B) of an amount other than a quarantined amount.
1773 Part L s LK 6 Income Tax Act 2007 Reprinted as at 1 January 2010 Making credit available Company A may choose to make the amount of the tax credit available to another company (company C) that is part of the group of companies for the tax year in which the credit is avail- able to the company if the requirements of subsections (3) and (4) are met.
Amount limited The amount of the credit must not be more than the amount that would be company C’s income tax liability if that company’s only assessable income were the attributed CFC income de- rived in the corresponding income year from a CFC resident in the same country in which company B was resident in the accounting period in which the income tax giving rise to the credit was paid or payable.
Use limited Company A may make an amount of a tax credit available to company C to use only if the amount would be able to be used under subpart IC (Grouping tax losses), reading the subpart by substituting— (a) a wholly-owned group of companies for a group of companies: a credit of company A for a tax loss component of the loss company: the use of the credit to satisfy an income tax liability for the use of a tax loss component to reduce net income, in both subpart IC and section GB 4 (Arrangements for grouping tax losses: companies): company C for the company B: the income tax liability of company C for the net income of company B: sections LK 1 to LK 5 for sections IA 3 to IA 5 (which relate to the use of tax losses generally).
(b) (c) (d) (e) (f) Deﬁned in this Act: accounting period, amount, assessable income, attributed CFC income, CFC, company, corresponding income year, group of companies, income interest, income tax, income tax liability, net income, pay, quarantined amount, tax credit, tax loss component, tax year, wholly-owned group of com- panies Compare: 2004 No 35 s LC 5 (2) (3) (4) 1774 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LK 7 Treatment of taxable distributions LK 7 Taxable distributions and NRWT rules (1) (2) (3) (4) When this section applies This section applies when a CFC receives a taxable distribu- tion in an accounting period and, for a person with an income interest of 10% or more in the CFC under the rules in sections EX 14 to EX 17 (which relate to the 10% threshold and vari- ations in income interest level), the taxable distribution gives rise to attributed CFC income to which section EX 19 (Tax- able distribution from non-complying trust) applies.
When credit not allowed The person does not have a tax credit in relation to tax paid on the taxable distribution unless the tax is substantially the same as non-resident withholding tax (NRWT).
Amount of tax on distribution The amount of tax that gives rise to the credit must not be more than an amount calculated using the formula— Deﬁnition of items in formula In the formula in subsection (3),— (a) person’s taxable distribution is the amount of the tax- able distribution derived by the CFC, including a pay- ment of tax that meets the requirements of subsection (2): total distribution is the total amount of the distribution derived by the CFC, including a payment of tax that meets the requirements of subsection (2): foreign tax paid is the payment of tax that meets the requirements of subsection (2).
(b) (c) (5) Amount of person’s credit The amount of a credit of a person under this section is equal to an amount calculated using the formula— section EX 18 income interest × amount of tax.
Deﬁnition of items in formula In the formula in subsection (5),— (6) 1775 Part L s LK 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) section EX 18 income interest is the income interest of the person used to calculate attributed CFC income under section EX 18 (Formula for calculating attributed CFC income or loss) for the accounting period corres- ponding to the tax year: amount of tax is the amount of tax determined under subsection (3).
Deﬁned in this Act: accounting period, amount, amount of tax, attributed CFC income, CFC, distribution, income interest, non-resident withholding tax, NRWT, NRWT rules, pay, tax year, taxable distribution Compare: 2004 No 35 s LC 4(7) Consolidated companies LK 8 Tax credits of consolidated companies If a consolidated group has a tax credit under section LK 1, the credit is treated as the consolidated group’s credit and not the credit of a group company.
Deﬁned in this Act: company, consolidated group, tax credit Compare: 2004 No 35 s LC 16(1) LK 9 Use of company’s credits carried forward When this section applies This section applies when a company that is part of a consoli- dated group of companies in an income year has a credit car- ried forward for the tax year corresponding to the income year.

First use by consolidated group The amount must ﬁrst be used to satisfy the income tax liabil- ity of the consolidated group for the income year.
However, the amount must not be more than the consolidated group’s quarantined amount.

Second use by group company or another consolidated group If, after applying subsection (2), an amount remains, the amount may be used to satisfy the income tax liability of the company or the income tax liability of another consolidated group in the income year.

Sections LK 10 and LK 11 override this subsection.


(1) (2) (3) 1776 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LK 10 (4) Third use: amount carried forward If, after applying subsections (2) and (3), a balance remains, the amount must be carried forward to the next income year under section LK 4(2).
Deﬁned in this Act: amount, company, consolidated group, corresponding in- come year, income tax liability, income year, quarantined amount, tax year Compare: 2004 No 35 s LC 16(2), (3) LK 10 When group membership lacking in tax year in which credit arises (1) (2) When this section applies This section applies when a company that is part of a consoli- dated group of companies has a credit carried forward for a tax year, but the company was not part of the same consolidated group as 1 or more companies in the consolidated group in an earlier tax year in which the credit arises.
Limitation on amount used The amount of the credit carried forward and made available for the consolidated group to use under section LK 9(2) is limited to the sum of— (a) the amount of the credit carried forward that the com- pany could use under section LA 2 or LA 4 (which relate to the company’s income tax liability), if the company were not part of the consolidated group for the tax year; and the amount that each company in the consolidated group would have under section LK 6 in relation to the amount of credit carried forward if— (i) the consolidation of the companies is ignored; and all required steps are presumed taken for section LK 6 to apply.
(ii) (b) (3) Relationship with section FM 3 In subsection (2), section FM 3 (Liability of consolidated groups and group companies) applies to the calculation of the income tax liability.
Deﬁned in this Act: amount, company, consolidated group, income tax liability, tax year Compare: 2004 No 35 s LC 16(4) 1777 Part L s LK 11 Income Tax Act 2007 Reprinted as at 1 January 2010 LK 11 When group membership lacking in tax year in which credit used When this section applies This section applies when a company that is part of a consoli- dated group of companies has a credit carried forward for a tax year, but the company is not part of the consolidated group for the whole tax year in which the credit carried forward is used.
Limitation on amount The amount of the credit carried forward and made available for the consolidated group to use under section LK 9(2) is limited to the least of— (a) the amount of the credit carried forward shown in ﬁnan- cial statements provided with the consolidated group’s return of income for the income year corresponding to the tax year that— (i) relate to the part of the income year when the company was part of the consolidated group; and disclose the amount that would be the net income attributable to the part of the income year when the company is part of the consolidated group, determined on a fair and reasonable basis of at- tribution: (ii) (b) (c) the amount of the credit calculated using the formula in subsection (3): the amount referred to in section LK 10(2).
Formula The amount referred to in subsection (2)(b) is calculated using the formula— amount carried forward − (part-year credits + pre-consolidation credits).
Deﬁnition of items in formula In the formula,— (a) amount carried forward is the amount of the credit carried forward under section LK 9(2) before applying section LK 10 and this section: part-year credits is the amount of the credit carried forward that the company may use under section LA 2 or LA 4 (which relate to the company’s income tax (b) (1) (2) (3) (4) 1778 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LK 13 (c) liability) for the part of the tax year before the company becomes part of the consolidated group: pre-consolidation credits is the amount of the credits carried forward that the company must make available for another consolidated group of which it was part be- fore becoming part of the consolidated group.
Deﬁned in this Act: amount, company, consolidated group, corresponding in- come year, income year, net income, return of income, tax year Compare: 2004 No 35 s LC 16(5) Amalgamations of companies LK 12 Treatment of credits when companies amalgamate On an amalgamation, for the purposes of determining whether a credit carried forward is available under section LK 5 or whether the requirements of section LK 6 are met, the amalga- mated company is treated as if it were the amalgamating com- pany with the same holders of shares and options over shares.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, share Compare: 2004 No 35 ss LC 8, LC 11, LC 12 LK 13 Use of credits by amalgamated company (1) When this section applies This section applies when an amalgamating company ends its existence on a resident’s restricted amalgamation and the com- pany has a tax credit under this subpart that— (a) has not otherwise been used by the amalgamating com- pany before the date of amalgamation: if treated as a credit remaining for a tax year under sec- tion LA 4(1) (When total tax credit more than income tax liability), could be made available to each of the amalgamated company, unless it is a company incorpor- ated only on amalgamation, and a company that is amal- gamated with the amalgamated company.
(b) 1779 Part L s LK 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Amalgamated company’s credit The tax credit is treated as a credit of the amalgamated com- pany for the tax year in which the amalgamation occurs.
Deﬁned in this Act: amalgamated company, amalgamating company, company, resident’s restricted amalgamation, tax credit, tax year Compare: 2004 No 35 s LC 8 LK 14 Use by amalgamated company of credits carried forward When this section applies This section applies when an amalgamated company has a tax credit under this subpart for a tax year before that in which the amalgamation takes place, and the credit has not been used before the date of amalgamation.
Restrictions on carrying credit forward: year of amalgamation The credit may be carried forward to the tax year of amalgam- ation or a later tax year only if— (a) (b) the requirements of sections LK 1 to LK 5 are met; and the credit could be made available under section LK 6 for the part of the tax year ending with the date of the amalgamation to each amalgamating company.
Restrictions on carrying credit forward: order If the tax credits of 2 or more amalgamating companies are credited under section LK 13 against the amalgamated com- pany’s income tax liability for a tax year, those tax credits must— (a) if resulting from tax payable in 2 or more tax years, be credited in the same order as arising; and if resulting from tax payable in the same tax year, be credited, so far as the tax extends,— (i) in the order chosen by the amalgamated company by notice to the Commissioner; or otherwise, on a pro rata basis.
(ii) (b) Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, Commissioner, income tax liability, pay, tax credit, tax year Compare: 2004 No 35 ss LC 9, LC 10 (1) (2) (3) 1780 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LL 3 LK 15 Use of amalgamating company’s credits (1) (2) When this section applies This section applies when a company has a tax credit under this subpart arising in whole or in part before an amalgamation.
Restrictions on use The amalgamated company may use the credit only if the com- pany and each amalgamating company meet the requirements of section LK 6.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, company, tax credit Compare: 2004 No 35 s LC 12 Subpart LL—Underlying foreign tax credits (UFTC) [Repealed] Subpart LL: repealed (with effect on 30 June 2009), on 6 October 2009, by section 343(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
LL 1 What this subpart does [Repealed] Section LL 1: repealed (with effect on 30 June 2009), on 6 October 2009, by section 343(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

LL 2 Tax credits for underlying foreign tax [Repealed] Section LL 2: repealed (with effect on 30 June 2009), on 6 October 2009, by section 343(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section LL 2(4)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

LL 3 Meaning of grey list dividend [Repealed] Section LL 3: repealed (with effect on 30 June 2009), on 6 October 2009, by section 343(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
1781 Part L s LL 4 Income Tax Act 2007 Reprinted as at 1 January 2010 LL 4 Tracking accounts [Repealed] Section LL 4: repealed (with effect on 30 June 2009), on 6 October 2009, by section 343(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
LL 5 Meaning of foreign dividend company net earnings [Repealed] Section LL 5: repealed (with effect on 30 June 2009), on 6 October 2009, by section 343(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
LL 6 Foreign dividend company lower tier UFTCs [Repealed] Section LL 6: repealed (with effect on 30 June 2009), on 6 October 2009, by section 343(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section LL 6(4)(d): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
LL 7 Conduit ﬁnancing arrangements [Repealed] Section LL 7: repealed (with effect on 30 June 2009), on 6 October 2009, by section 343(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

LL 8 Currency conversion [Repealed] Section LL 8: repealed (with effect on 30 June 2009), on 6 October 2009, by section 343(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
LL 9 Some deﬁnitions [Repealed] Section LL 9: repealed (with effect on 30 June 2009), on 6 October 2009, by section 343(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
1782 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LO 2 Subpart LO—Tax credits for Maori authority credits LO 1 Tax credits for Maori authority credits (1) (2) (3) Amount of credit A person who derives a taxable Maori authority distribution in a tax year has a tax credit for the tax year equal to the amount of the Maori authority credit attached to the distribution.
Amount altered The amount of the person’s credit in subsection (1) may be reduced or increased if any of sections LO 2 to LO 4 apply.

Arrangements for tax advantage A person’s credit under this section is extinguished if sections GB 42 and GB 43 (which relate to Maori authority arrange- ments to obtain tax advantage) apply.
Deﬁned in this Act: amount, Maori authority credit, tax credit, tax year, taxable Maori authority distribution Compare: 2004 No 35 ss LB 1(1)(m), LD 3A(1) LO 2 Beneﬁciaries of trusts (1) (2) (3) When this section applies This section applies when a person who has a tax credit under section LO 1 is a beneﬁciary of a trust and, in that capacity, derives a taxable Maori authority distribution.
Limitation on amount of credit The person’s credit is limited to an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) (b) person’s distributions is the total taxable Maori au- thority distributions for the tax year made to the person in their capacity as beneﬁciary of the trust: trust distributions is the total distributions for the tax year made to all beneﬁciaries of the trust in their cap- acity as beneﬁciaries, and includes all supplementary dividends paid to them: 1783 Part L s LO 2B Income Tax Act 2007 Reprinted as at 1 January 2010 (c) (d) total beneﬁciary credits is the total Maori authority credits attached to taxable Maori authority distributions and total supplementary dividends for the tax year made to all beneﬁciaries of the trust in their capacity as bene- ﬁciaries: person’s supplementary dividend is the total supple- mentary dividends for the tax year paid to the person in their capacity as beneﬁciary of the trust.
Deﬁned in this Act: amount, distribution, Maori authority credit, pay, supple- mentary dividend, tax credit, tax year, taxable Maori authority distribution Compare: 2004 No 35 s LB 1(3), (3A) LO 2B Credit of RSCT for Maori authority credit (1) (2) Retirement scheme contributions A retirement scheme contributor who attaches a Maori author- ity credit to a retirement scheme contribution for a person in an income year has a credit of RSCT equal to the lesser of— (a) (b) the amount of the Maori authority credit: the liability of the contributor for RSCT on the contri- bution.
When credit more than liability If the amount of the Maori authority credit is more than the liability of the contributor for RSCT on the contribution,— (a) the amount of the excess is treated as a Maori authority credit attached to a taxable Maori authority distribution from the contributor to the person; and the person responsible for withholding the RSCT must, within 30 days of the contribution, notify the person of the amount of the excess credit.
(b) Deﬁned in this Act: amount, income year, Maori authority credit, notify, retire- ment scheme contribution, retirement scheme contributor, RSCT Compare: 2004 No 35 s LD 4 Section LO 2B: inserted, on 1 April 2008, by section 449 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
LO 3 Application of Maori authority distribution ratio When this section applies This section applies when a person who has a tax credit under section LO 1 derives a taxable Maori authority distribution that (1) 1784 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LO 4 (2) has a Maori authority credit ratio greater than the maximum permitted ratio calculated under section OA 18 (Calculation of maximum permitted ratios).
Amount of reduction The person’s credit is reduced by an amount equal to the amount by which the credit is greater than the maximum permitted ratio.
Deﬁned in this Act: amount, Maori authority credit ratio, maximum permitted ratio, tax credit, taxable Maori authority distribution Compare: 2004 No 35 s LB 1(1)(ea) LO 4 When income tax unpaid (1) (2) (3) When this section applies This section applies when— (a) (b) (c) a person has a tax credit under section LO 1 and a Maori authority credit is attached to a dividend; and the dividend is paid by a Maori authority that has a debit balance in their Maori authority credit account at the end of the tax year; and the authority has not paid further income tax by the due date referred to in section OK 21 (Further income tax for closing debit balance).
Amount of reduction The Commissioner may reduce the person’s credit by an amount equal to their proportion of the unpaid amount under subsection (1)(c).

When failure to pay remedied To the extent to which a Maori authority remedies the failure after the due date, this section does not apply.
Deﬁned in this Act: amount, Commissioner, dividend, further income tax, Maori authority, Maori authority credit, Maori authority credit account, pay, tax credit, tax year Compare: 2004 No 35 s LD 3A(6) 1785 Part L s LO 5 Income Tax Act 2007 Reprinted as at 1 January 2010 LO 5 Evidential requirements If a person who has a tax credit under section LO 1 does not meet the evidential requirements of section 78D of the Tax Administration Act 1994, the person’s credit may be reduced.
Deﬁned in this Act: tax credit Compare: 2004 No 35 s LD 3A(5) Subpart LP—Tax credits for supplementary dividends Introductory provision LP 1 What this subpart does (1) (2) Supplementary dividends This subpart provides the rules for the treatment of a tax credit for a supplementary dividend.

The amount of the credit is de- termined by reference to an imputation credit attached to a dividend paid by a company to a non-resident.
For a credit to arise under this subpart, the company must pay a supple- mentary dividend, and the amount of the credit is equal to the amount of the supplementary dividend.

Supplementary dividend holding companies Some special rules exist for a supplementary dividend holding company that allow a supplementary dividend and a tax credit for a supplementary dividend to pass through a chain of com- panies.
Deﬁned in this Act: amount, company, dividend, imputation credit, non-resi- dent, pay, supplementary dividend, supplementary dividend holding company, tax credit Compare: 2004 No 35 s LE 1 LP 2 Tax credits for supplementary dividends Use of credits When this section applies This section applies when a company resident in New Zealand pays a dividend and a related supplementary dividend to— (a) (b) a non-resident; or a supplementary dividend holding company that is not part of the same consolidated group as the company.
(1) 1786 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LP 2 (2) (3) (4) (5) (6) Amount of credit For the year of payment, the company has a tax credit equal to an amount calculated using the formula— attached imputation credit × 7 17.

Deﬁnition of item in formula In the formula, attached imputation credit is the imputation credit that would, in the absence of this subpart, be attached to the dividend.
Limitation on use of credit A company that is a supplementary dividend holding company may choose under section LA 2 or LA 4 (which relate to the satisfaction of the company’s income tax liability) to limit the amount of a tax credit for a tax year.

The reduced amount must not be less than the amount of supplementary dividends that the company derives for the income year corresponding to the tax year.
Meaning of year of payment In this subpart, year of payment means— (a) (b) unless paragraph (b) applies, the tax year correspond- ing to the income year in which the company pays the dividend: if the company and the supplementary dividend hold- ing company are associated and, because their balance dates do not match, the supplementary dividend holding company derives the dividend in an income year that is later than the income year of the company in which it pays the dividend, the tax year corresponding to the in- come year in which the supplementary dividend holding company derives the dividend.
Associated persons test For the purposes of the deﬁnition of year of payment in sub- section (5), the test of association for the company and the supplementary dividend holding company is set out in subpart YB (Associated persons and nominees) but on the basis that a reference there to “50% or more” is treated as a reference to “more than 50%”.

1787 Part L s LP 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (7) Section OZ 12 (Tax credits for non-resident investors) may apply to modify subsection (2).
Deﬁned in this Act: amount, associated person, company, consolidated group, corresponding income year, dividend, imputation credit, non-resident, pay, resi- dent in New Zealand, supplementary dividend, supplementary dividend holding company, tax credit, tax year, year of payment Compare: 2004 No 35 ss LE 2(1), (2), (2A), LE 3(5) Section LP 2(2) formula: amended (with effect from 1 April 2008), on 29 May 2008, by section 32(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section LP 2(2) formula: amended, on 1 April 2008, by section 450(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LP 2(7): added, on 1 April 2008, by section 450(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

LP 3 Use of remaining credits When this section applies This section applies when a company has a tax credit remain- ing for a tax year under section LA 5(3) (Treatment of remain- ing credits).
Grouping amount The company may make the amount available to another com- pany (company B) that is part of the same wholly-owned group of companies as the company for the corresponding in- come year in which the remaining credit arises.
Carrying back and using or grouping amount If the amount of the remaining credit has never been carried forward from an earlier tax year, the company may either— (a) use the amount for any 1 of the 4 tax years that are immediately before the tax year in which the remaining credit arises; or (b) make the amount available to company B, if both com- panies are part of the same wholly-owned group of com- panies for the relevant tax year in the 4-year period.
Carrying amount forward If, after applying subsections (2) and (3), the company has an amount of tax credit remaining for the tax year, the amount must be carried forward to the next tax year as a credit carried forward.

(1) (2) (3) (4) 1788 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LP 4 (5) (6) Notifying Commissioner The company makes a choice under subsection (2) or (3) by notifying the Commissioner in their return of income for the income year that corresponds to the tax year.
When companies in same group For the purposes of subsections (2) and (3), the company and company B must be part of the same wholly-owned group of companies for the whole of the relevant income year or, if 1 of the companies exists for only part of the year, for the whole of the period of the income year when both companies are in existence.
Deﬁned in this Act: amount, Commissioner, company, corresponding income year, income year, notify, return of income, tax credit, tax year, wholly-owned group of companies Compare: 2004 No 35 s LE 2(3), (4), (6), (7) Section LP 3(5): amended (with effect on 1 April 2008), on 6 October 2009, by section 344(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LP 4 Continuity rules for carrying credits forward (1) (2) (3) When this section applies This section applies for the purposes of section LA 5(3) (Treat- ment of remaining credits) when a company has an amount of a tax credit that must be carried forward under section LP 3(4).
Minimum interests required The amount is available for use under section LP 3(4) if a group of persons exists that has, for the continuity period,— (a) minimum voting interests in the company that add up to (b) 49% or more; and when a market value circumstance exists for the com- pany in the continuity period, minimum market value interests in the company that add up to 49% or more.
Some deﬁnitions In this section,— continuity period means the period that starts on the ﬁrst day of the income year that corresponds to the tax year in which the tax credit ﬁrst arises and ends on the last day of the income year that corresponds to the tax year to which the amount of the credit has been carried forward 1789 Part L s LP 5 Income Tax Act 2007 Reprinted as at 1 January 2010 minimum market value interest means the lowest market value interest that a person has in the company for the con- tinuity period minimum voting interest means the lowest voting interest that a person has in the company for the continuity period.
Deﬁned in this Act: amount, company, continuity period, corresponding in- come year, group of persons, income year, market value circumstance, market value interest, minimum market value interest, minimum voting interest, tax credit, tax year, voting interest Compare: 2004 No 35 s LE 2(5) Section LP 4(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 345(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section LP 4 list of deﬁned terms market value circumstance: inserted (with effect on 1 April 2008), on 6 October 2009, by section 345(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LP 5 Application of benchmark dividend rules and imputation credit ratio Applying benchmark dividend rules The benchmark dividend rules in sections OB 61 and OC 28 (which relate to the allocation of imputation and FDP credits) and sections GB 35 and GB 36 (which relate to imputation ar- rangements to obtain a tax advantage) apply as if the company had never paid the supplementary dividend.
Increase in imputation credit The maximum permitted ratio referred to in section OB 60(5) (Imputation credits attached to dividends) and sections GB 35 and GB 36 apply to a dividend as if the imputation credit at- tached to the dividend were increased by an amount equal to the related supplementary dividend.

Section OZ 12 (Tax credits for non-resident investors) may apply to modify this section.
Deﬁned in this Act: amount, benchmark dividend, company, imputation credit, maximum permitted ratio, supplementary dividend Compare: 2004 No 35 s LE 2(9), (10) Section LP 5(3): added, on 1 April 2008, by section 451 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
(1) (2) (3) 1790 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LP 7 LP 6 Deriving supplementary dividend and breach of terms of trust (1) (2) Class of shares The payment of a supplementary dividend on only some shares in a class of shares does not constitute a breach of— (a) (b) section 53 of the Companies Act 1993; or the company’s constitution or its articles of association, unless the provision expressly refers to this subsection; or any other provision.
(c) Trusts If a trustee derives a dividend and is required under the terms of a trust to distribute it as beneﬁciary income to a beneﬁciary, the trustee’s distribution of a supplementary dividend does not breach the terms of the trust.
Deﬁned in this Act: beneﬁciary income, company, distribution, dividend, pay, share, supplementary dividend, trustee Compare: 2004 No 35 s LE 2(11), (12) Supplementary dividend holding companies LP 7 Requirements for supplementary dividend holding companies (1) When this section and sections LP 8 and LP 9 apply This section, and sections LP 8 and LP 9, apply for an income year when a company— (a) is a supplementary dividend holding company when it derives a dividend and a related supplementary divi- dend; and is not part of the same consolidated group as the com- pany paying the dividends, as described in section LP 2(1)(b).
(b) (2) When requirements no longer met The company must notify each company from which it may derive a supplementary dividend if it no longer meets the re- 1791 Part L s LP 8 Income Tax Act 2007 Reprinted as at 1 January 2010 quirements set out in the deﬁnition of supplementary divi- dend holding company.
Deﬁned in this Act: company, consolidated group, dividend, income year, no- tify, pay, supplementary dividend, supplementary dividend holding company Compare: 2004 No 35 s LE 3(1), (3), (11) LP 8 Relationship with exempt income rules What this section applies to This section applies to a supplementary dividend holding com- pany that derives a dividend and related supplementary divi- dend in an income year when, but for this section, both divi- dends would be exempt income under section CW 10 (Divi- dend within New Zealand wholly-owned group).
Income The supplementary dividend holding company derives as- sessable income equal to an amount calculated using the formula— attached credit + dividend tax rate.

Deﬁnition of items in formula In the formula,— (a) (b) (c) attached credit is the imputation credit attached to the dividend: dividend is the supplementary dividend related to the dividend: tax rate is the basic rate of income tax set out in sched- ule 1, part A (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts).
Treatment of imputation credit The imputation credit referred to in subsection (3) is assessable income of the supplementary dividend holding company for the income year for the purposes of section LE 1 (Tax credits for imputation credits).

(1) (2) (3) (4) 1792 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LP 10 (5) Section OZ 12 (Tax credits for non-resident investors) may apply to modify subsection (3)(c).
Deﬁned in this Act: amount, assessable income, dividend, exempt income, im- putation credit, income tax, income year, supplementary dividend, supplemen- tary dividend holding company Compare: 2004 No 35 s LE 3(6), (8) Section LP 8(2) formula: substituted (with effect on 1 April 2008), on 7 De- cember 2009, by section 80(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section LP 8(3)(c): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section LP 8(5): added, on 1 April 2008, by section 452 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

LP 9 Relationship with RWT rules (1) (2) When this section applies This section applies to a supplementary dividend holding com- pany that derives a dividend and related supplementary divi- dend in an income year.
When rules do not apply The RWT rules do not apply to the dividend or the related supplementary dividend to the extent to which the amount is no more than the amount calculated under section LP 8(2).

The RWT rules do not apply to the imputation credit referred to in that section.
Deﬁned in this Act: amount, dividend, imputation credit, income year, RWT rules, supplementary dividend, supplementary dividend holding company Compare: 2004 No 35 s LE 3(7), (9) LP 10 Limitation on deductions (1) Limitation on total annual deductions Despite section BD 4 (Allocation of deductions to particular income years), the annual total deduction of a supplementary dividend holding company under section BC 3 (Annual total deduction) that is allocated to a tax year must not be more than an amount calculated using the formula— 1793 Part L s LP 10 Income Tax Act 2007 Reprinted as at 1 January 2010 Deﬁnition of items in formula In the formula,— (a) company’s income is the supplementary dividend holding company’s income for the income year that corresponds to the tax year: company’s total credits is the supplementary dividend holding company’s total amount of tax credits that are non-refundable tax credits, tax credits for imputation credits, and tax credits for foreign dividend payment (FDP) credits for the income year that corresponds to the tax year: supplementary amount is the total amount of supple- mentary dividends derived by the supplementary divi- dend holding company for the income year that corres- ponds to the tax year: tax rate is the basic rate of income tax set out in sched- ule 1, part A (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts).
(b) (c) (d) Tax loss components A deduction that would, in the absence of subsection (1), be allocated to the tax year is a tax loss component that may be carried forward under Part I (Treatment of tax losses) if the relevant requirements of that Part are met.

Calculating credits under this Part Subsection (1) does not affect the calculation of the amount of a supplementary dividend holding company’s tax credit under this Part.
Deﬁned in this Act: amount, annual total deduction, corresponding income year, deduction, FDP credit, imputation credit, income, income tax, income year, non-refundable tax credit, supplementary dividend, supplementary divi- dend holding company, tax credit, tax loss component, tax year Compare: 2004 No 35 ss LE 3(10), LE 4 Section LP 10(2)(d): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(2) (3) (4) 1794 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LQ 5 Subpart LQ—Tax credits of conduit tax relief companies LQ 1 Tax credits of CTR companies [Repealed] Section LQ 1: repealed (with effect on 30 June 2009), on 6 October 2009, by section 346(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section LQ 1(3)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

LQ 2 Limitation on amount of credit [Repealed] Section LQ 2: repealed (with effect on 30 June 2009), on 6 October 2009, by section 346(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
LQ 3 Determining percentage of non-resident shareholders [Repealed] Section LQ 3: repealed (with effect on 30 June 2009), on 6 October 2009, by section 346(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
LQ 4 Date for determining percentage of non-resident shareholders [Repealed] Section LQ 4: repealed (with effect on 30 June 2009), on 6 October 2009, by section 346(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

LQ 5 CTR additional dividends (1) (2) When this section applies This section applies when a CTR company pays a dividend to a non-resident, and a CTR credit is attached to the dividend.
The rules for determining residence in sections YD 9 to YD 11 (which relate to CTR companies) apply for the purposes of this section.

Payment of additional dividend required The company must pay a CTR additional dividend relating to the dividend when the dividend is paid.
The additional divi- dend is exempt income under section CW 11(2) (Dividend of 1795 Part L s LR 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) (6) conduit tax relief holding company) of the company receiving the dividend.

Amount of additional dividend The amount of the CTR additional dividend must be equal to the amount of the CTR credit attached to the dividend.
Relationship with rules on imputation credits Sections GB 35, GB 36, OA 18, OB 60, OB 61, OC 27, and OC 28 (which relate to the allocation of imputation credits and FDP credits) apply as if the company had never paid a CTR additional dividend.
Class of shares The payment of an additional dividend to all non-resident shareholders who hold shares in a particular class does not constitute a breach of— (a) (b) section 53 of the Companies Act 1993; or the company’s constitution or its articles of association, unless the provision expressly refers to this subsection; or any other provision.
(c) Trusts If a trustee derives a dividend and is required under the terms of a trust to distribute it as beneﬁciary income to a beneﬁciary, the trustee’s distribution of an additional dividend to the same beneﬁciary does not breach the terms of the trust.
Deﬁned in this Act: amount, beneﬁciary income, company, CTR additional dividend, CTR company, CTR credit, distribution, dividend, exempt income, imputation credit, non-resident, pay, share, shareholder, trustee Compare: 2004 No 35 s LG 1 Subpart LR—Tax credits for policyholder income LR 1 Tax credits for policyholder income Amount of credit A person who has a credit in their policyholder credit account for a tax year has a tax credit equal to the amount, as limited under subsection (2), of the balance of the account determined under sections OJ 8, OJ 9, OJ 16, OP 115, and OP 116 (which (1) 1796 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LS 1 (2) relate to the use of credit balances against policyholder base income tax liability).
Limitation The person’s use, under section LA 2 (Satisfaction of income tax liability), of a credit referred to in subsection (1) is limited to the amount that would be their income tax liability for the tax year if their only assessable income were policyholder in- come in the accounting period in which the amount of tax giv- ing rise to the credit was paid or payable.
Deﬁned in this Act: accounting period, amount, assessable income, income tax liability, pay, policyholder base income tax liability, policyholder credit account, policyholder income, tax credit, tax year Compare: 2004 No 35 ss ME 19, ME 24, ME 28 Subpart LS—Tax credits for portfolio tax rate entities and investors LS 1 Tax credits for portfolio tax rate entities relating to certain investors (1) (2) Credit for income tax A portfolio tax rate entity has a tax credit for a tax year of an amount determined under subsection (2) for a portfolio calcu- lation period in the tax year and an investor as a member of a portfolio investor class if— (a) (b) the investor is not a zero-rated investor; and the entity does not make payments of tax under sec- tion HL 23 (Payments of tax by portfolio tax rate entity choosing to pay provisional tax); and for an entity that makes payments of tax under section HL 22 (Payments of tax by portfolio tax rate entity mak- ing no election), the portfolio calculation period does not include part of a portfolio investor exit period for the investor.
(c) Amount of credit The amount of the credit is— (a) the amount of a tax credit allocated to the investor and the portfolio calculation period under section HL 29 (Credits received by portfolio tax rate entity or portfolio 1797 Part L s LS 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) investor proxy) from an imputation credit or a credit for tax paid or withheld: the amount of a tax credit under section HL 21(2) (Port- folio entity tax liability and tax credits of portfolio tax rate entity for period) arising from portfolio investor al- located loss of the investor for the portfolio calculation period.
Deﬁned in this Act: amount, imputation credit, investor, pay, portfolio calcu- lation period, portfolio investor allocated loss, portfolio investor exit period, portfolio tax rate entity, tax credit, tax withheld, tax year, zero-rated investor Compare: 2004 No 35 s KI 1 LS 2 Tax credits for certain investors in portfolio tax rate entities (1) (2) When this section applies This section applies when a person has portfolio investor allo- cated income in a tax year from a portfolio tax rate entity if— the income would be excluded income of the person in (a) the absence of section CX 56(1)(b) (Portfolio investor allocated income and distributions of income by port- folio investment entities): the income is not excluded income because section CX 56(4) applies.
(b) Amount of credit The person has a tax credit that may be used to satisfy their income tax liability for the tax year equal to the amount of income tax paid by the portfolio tax rate entity in relation to the portfolio investor allocated income.
Deﬁned in this Act: amount, excluded income, income tax, income tax liability, pay, portfolio investor allocated income, portfolio tax rate entity, tax credit, tax year Compare: 2004 No 35 s LD 10 Section LS 2(1): substituted (with effect on 1 April 2009), on 6 October 2009, by section 347(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
LS 3 Tax credits for certain zero-rated portfolio investors When this section applies This section applies when a person who is a zero-rated port- folio investor has portfolio investor allocated income for a tax (1) 1798 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LZ 1 (2) year from a portfolio tax rate entity that pays income tax on the allocated income.
Amount of credit The person has a tax credit that may be used to satisfy their income tax liability for the tax year of an amount equal to the income tax paid by the portfolio tax rate entity in relation to the portfolio investor allocated income.
Deﬁned in this Act: amount, income tax, income tax liability, pay, portfolio investor allocated income, portfolio tax rate entity, tax credit, tax year, zero- rated portfolio investor Compare: 2004 No 35 s LD 10B LS 4 Tax credits for certain investors in portfolio investor exit period (1) (2) When this section applies This section applies when a person has portfolio investor allo- cated income in a tax year from a portfolio tax rate entity for a portfolio investor exit period, and the entity makes a payment under section HL 22(5) (Payments of tax by portfolio tax rate entity making no election) to the Commissioner after the port- folio investor exit period.
Amount of credit The person has a tax credit that may be used to satisfy their income tax liability for the tax year of an amount equal to the amount paid by the portfolio tax rate entity under section HL 22(5).
Deﬁned in this Act: amount, income tax liability, pay, portfolio investor allo- cated income, portfolio investor exit period, portfolio tax rate entity, tax credit, tax year Compare: 2004 No 35 s LD 11 Subpart LZ—Terminating provisions Underlying foreign tax credits LZ 1 Low tax jurisdiction companies (1) Earnings and income tax If a company is treated under section YD 3 (Country of resi- dence of foreign companies) for the purposes of the inter- national tax rules as resident in a country or territory listed 1799 Part L s LZ 2 Income Tax Act 2007 Reprinted as at 1 January 2010 in schedule 26 (Low tax jurisdictions or territories) during any part of an accounting year ending before 28 September 1993 (a low tax year), the earnings of, and the income tax paid or payable by, the company for the low tax year are treated as not existing for purposes of subpart LL (Underlying foreign tax credits (UFTC)), unless— (a) the earnings are dividends derived from another com- pany that is not a company listed in schedule 26: income tax is paid or payable in relation to the divi- dends referred to in paragraph (a), and the income tax is payable in the country or territory where the other com- pany referred to in paragraph (a) is resident.
(b) (2) Exclusion Subsection (1) does not apply if the foreign dividend company is a controlled foreign company (CFC) for the whole of a low tax year, and the low tax year is an accounting year that ends on or after 1 April 1988.
Deﬁned in this Act: accounting year, CFC, company, dividend, foreign divi- dend company, income tax, international tax rules, pay, resident Compare: 2004 No 35 s LF 6(1), (3) Credits for certain non-resident investment companies LZ 2 Certain development projects When this section and sections LZ 3 to LZ 5 apply This section and sections LZ 3 to LZ 5 apply to a non-resident investment company in relation to the development projects set out in the orders listed in subsection (2).
Development projects The development projects are speciﬁed in the following orders: (a) the Income Tax (Non-Resident Investment Companies) Order 1970 (SR 1970/138); or the Income Tax (Non-Resident Investment Companies) Order 1972 (SR 1972/19); or the Income Tax (Non-Resident Investment Companies) Order (No 2) 1972 (SR 1972/248); or (b) (c) (1) (2) 1800 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LZ 3 (3) (d) the Income Tax (Non-Resident Investment Companies) Order (No 3) 1974 (SR 1974/277).
Relationship with sections KF 1, NF 1(2)(a)(vi), NG 1(2)(f), and OB 5 Despite the repeal of sections KF 1, NF 1(2)(a)(vi), NG 1(2)(f), and OB 5 by sections 13, 21, 22, and 26 of the Income Tax Act 1994 Amendment Act (No 3) 1995, a non-resident investment company, in relation to the development projects described in subsection (2), continues to be eligible for the tax credits referred to in sections LZ 3 and LZ 4.
Deﬁned in this Act: non-resident investment company, tax credit Compare: 2004 No 35 s KZ 3(1), (4) LZ 3 Interest derived from development investments (1) (2) (3) When this section applies This section applies when— (a) (b) the only assessable income of a non-resident investment company in a tax year is interest derived from develop- ment investments; and the amount of the non-resident investment company’s income tax liability for the interest is more than the amount of income tax payable by the non-resident in- vestment company on the interest if it had been derived from a source in the country or territory in which the investment company is resident.
Tax credit The non-resident investment company is entitled to a tax credit equal to the amount of the excess referred to in subsection (1)(b).

Income tax liability under 15% of gross amount of interest Despite subsection (2), if the non-resident investment com- pany and the person by whom the interest is paid are not as- sociated persons, the amount of the non-resident investment company’s income tax liability for that interest must not be more than 15% of the gross amount of the interest.
Deﬁned in this Act: amount, assessable income, associated person, develop- ment investments, gross, income tax, income tax liability, interest, non-resident investment company, pay, resident, tax credit, tax year Compare: 2004 No 35 s KZ 3(2) 1801 Part L s LZ 4 Income Tax Act 2007 Reprinted as at 1 January 2010 LZ 4 Dividends derived from development investments (1) (2) When this section applies This section applies when— (a) (b) the only assessable income of a non-resident investment company in a tax year consists of dividends derived from development investments; and the amount of the non-resident investment company’s income tax liability for those dividends is more than the amount of income tax payable by the non-resident investment company on those dividends if they had been derived from a source in the country or territory in which the non-resident investment company is resident.
Tax credit A non-resident investment company is entitled to a tax credit equal to the amount of the excess referred to in subsection (1)(b).
Deﬁned in this Act: amount, assessable income, development investments, divi- dend, income tax, income tax liability, non-resident investment company, pay, resident, tax credit, tax year Compare: 2004 No 35 s KZ 3(3) LZ 5 Some deﬁnitions In sections LZ 2 to LZ 4,— development investments has the same meaning as in section OB 1 of the Income Tax Act 1994 immediately before its re- peal by section 25(6) of the Income Tax Act 1994 Amendment Act (No 3) 1995 non-resident investment company has the same meaning as in section OB 5 of the Income Tax Act 1994 immediately before its repeal by section 26 of the Income Tax Act 1994 Amendment Act (No 3) 1995.
Deﬁned in this Act: development investments, non-resident investment com- pany Compare: 2004 No 35 s KZ 3(1) 1802 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LZ 7 Credits for interest on home vendor mortgages LZ 6 Interest on home vendor mortgages (1) (2) (3) (4) (5) When this section applies This section applies when, in a tax year, a person derives in- terest in relation to a home vendor mortgage.
Exclusions This section does not apply to— (a) (b) (c) (d) (e) (f) an absentee; or a company; or a public authority; or a Maori authority; or an unincorporated body; or a trustee liable for income tax under subpart HC (Trusts) and section HZ 2 (Trusts that may become complying trusts).

Tax credit The person is entitled to a tax credit equal to an amount calcu- lated using the formula— interest × 0.020.
Deﬁnition of item in formula In the formula, interest means the amount of interest in com- plete dollars that the person derives in the tax year in relation to a home vendor mortgage.

Relationship to section LZ 7 This section is overridden by section LZ 7.
Deﬁned in this Act: absentee, amount, company, distribution, home vendor mortgage, income tax, interest, Maori authority, public authority, tax credit, tax year, trustee Compare: 2004 No 35 s KE 1(1) LZ 7 Maximum amount of credit under section LZ 6 (1) Maximum amount: 1 person If only 1 person has provided the loan secured by a home ven- dor mortgage, the maximum amount of tax credit that the per- son is entitled to under section LZ 6 in a tax year is $500.
1803 Part L s LZ 8 Income Tax Act 2007 Reprinted as at 1 January 2010 Maximum amount: 2 or more persons (2) When 2 or more persons have provided the loan secured by a home vendor mortgage, for each person who has provided the loan, the maximum amount of tax credit under section LZ 6 in a tax year is calculated using the formula— (3) Deﬁnition of items in formula In the formula,— (a) loan provided is the amount of the loan provided by the persons: loan secured is the total amount of the loan secured by the home vendor mortgage.
(b) Deﬁned in this Act: amount, home vendor mortgage, loan, tax credit, tax year Compare: 2004 No 35 s KE 1(1) LZ 8 Meaning of home vendor mortgage (b) In sections LZ 6 and LZ 7, home vendor mortgage means a mortgage— (a) that secures a loan provided by the vendor or vendors of a house; and that is guaranteed by the Housing New Zealand Cor- poration under its housing mortgage guarantee scheme; and that has been approved by the Housing New Zealand Corporation, on or before 5 August 1982, for the pur- pose of the credit under this section; and for which notice of such guarantee and approval and of any variation has been delivered by the Housing New Zealand Corporation to the Commissioner.
Deﬁned in this Act: Commissioner, home vendor mortgage, loan, notice Compare: 2004 No 35 s KE 1(3) (d) (c) 1804 Reprinted as at 1 January 2010 Income Tax Act 2007 Part L s LZ 11 Credits for savings in special home ownership accounts LZ 9 Savings in special home ownership accounts (1) (2) (3) (4) When this section applies This section applies when a person operates a special home ownership account in a tax year.
Tax credit The person is entitled to a tax credit equal to an amount calcu- lated using the formula— increase in savings × 0.045.

Deﬁnition of item in formula In the formula, increase in savings is the total amount in com- plete dollars of the person’s increase in savings for all special accounts in the tax year.

Relationship with sections LZ 10 and LZ 11 Sections LZ 10 and LZ 11 override this section.
Deﬁned in this Act: amount, increase in savings, special home ownership ac- count, tax credit, tax year Compare: 2004 No 35 s KG 1(1) LZ 10 Maximum amount for 1 special home ownership account for 1 tax year For the purpose of calculating the amount of a credit under section LZ 9, the maximum amount of a single increase in savings for a special home ownership account for a tax year is $3,000.
Deﬁned in this Act: amount, increase in savings, special home ownership ac- count, tax year Compare: 2004 No 35 s KG 1(1) proviso LZ 11 Maximum amount for all special home ownership accounts for all tax years For the purpose of calculating the amount of a credit under section LZ 9, the maximum amount of increase in savings for 1805 Part L s LZ 12 Income Tax Act 2007 Reprinted as at 1 January 2010 all special home ownership accounts of the person for all tax years is $10,250 for a special home ownership account.
Deﬁned in this Act: amount, increase in savings, special home ownership ac- count, tax year Compare: 2004 No 35 s KG 1(2) LZ 12 Meaning of increase in savings (1) (2) Meaning In sections LZ 9 to LZ 11, increase in savings, in relation to a special home ownership account of a person and a tax year, means the total of— (a) the amount by which the amount standing to the credit of that special home ownership account at the end of that tax year or the date of the closure of that account, whichever is the earlier, is more than the amount stand- ing to the credit of that account, if any, at the end of the tax year immediately before that tax year; and the amount of resident withholding tax (RWT) withheld during that tax year from interest paid for the account.
(b) Withdrawals For the purposes of the deﬁnition of increase in savings,— (a) an amount withdrawn from a special home ownership account in accordance with a withdrawal certiﬁcate is treated as not having been withdrawn: an amount withdrawn from a special home ownership account in accordance with a withdrawal certiﬁcate, and subsequently redeposited in the account, is treated as not having been redeposited.
(b) Deﬁned in this Act: amount, increase in savings, interest, pay, RWT, special home ownership account, tax year, withdrawal certiﬁcate Compare: 2004 No 35 s KG 1(3), (4) Part M Tax credits paid in cash Subpart MA—General provisions MA 1 What this Part does This Part identiﬁes the tax credits to which a person is en- titled— 1806 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MA 5 (a) (b) (c) under the family scheme for a tax year, see subparts MA to MF and MZ (which relate to working for families tax credits): under the superannuation savings scheme for a year be- ginning on 1 July and ending on 30 June, see subpart MK (Tax credits for KiwiSaver schemes and comply- ing superannuation funds): for a redundancy payment, see subpart ML (Tax credits for redundancy payments).
Section MA 1(a): substituted, on 1 April 2008, by section 453 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MA 1(b): substituted, on 1 April 2008, by section 453 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MA 1(c): added, on 1 April 2008, by section 453 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
MA 2 Relationship with core provisions Section BC 8 (Satisfaction of income tax liability) deals with how a tax credit arising under this Part is applied.

Deﬁned in this Act: tax credit MA 3 Excluded income A tax credit that a person has under this Part is excluded in- come of the person.
Deﬁned in this Act: excluded income, tax credit Compare: 2004 No 35 s KD 8 MA 4 Calculation of amounts of credit producing negative amounts If a calculation under this Part produces a result that is negative for the amount of a tax credit or the amount of a component of a credit, the amount of the credit or component is zero.
Deﬁned in this Act: amount, tax credit Compare: 2004 No 35 s KB 3 MA 5 Advice from outside agencies In determining a person’s entitlement to a tax credit under sub- parts MB to MF and MZ, the Commissioner may obtain the advice of the chief executive or, as applicable, the person ap- 1807 Part M s MA 6 Income Tax Act 2007 Reprinted as at 1 January 2010 pointed under section 61A of the Defence Act 1990 for the purposes of the War Pensions Act 1954.
Deﬁned in this Act: chief executive, Commissioner, tax credit Compare: 2004 No 35 s KD 9 MA 6 Avoidance arrangements Section GB 44 (Arrangements involving tax credits for fam- ilies) may apply to reduce a tax credit under subparts MB to MF and MZ.

Deﬁned in this Act: tax credit Section MA 6: amended, on 1 April 2008, by section 454 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
MA 7 Meaning of full-time earner for family scheme Weekly employment In subparts MB to MF and MZ, a full-time earner means a person who, for a week,— (a) is employed for 20 hours or more and does not have a spouse, civil union partner, or de facto partner during the week; or has a spouse, civil union partner, or de facto partner (the partner) during the week, and either the person or the partner or both of them in total are employed for 30 hours or more.
(b) Modiﬁcations to weekly employment For the purposes of subsection (1),— (a) (b) (c) a person who is employed in a pay period that is longer than 1 week is treated as undertaking the employment activities to a uniform daily extent for the period: a person who is employed becomes incapacitated as de- scribed in subsection (3) and is unable to undertake em- ployment in a week in which but for the incapacity they would be employed for the number of hours set out in subsection (1)(a) and (b) is treated as having been em- ployed for the hours referred to: a person who is taking parental leave under the Parental Leave and Employment Protection Act 1987 for which a parental leave payment under Part 7A of that Act is payable, is treated as employed in the week for the num- (1) (2) 1808 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MA 8 (3) ber of hours for which they would have worked but for the period of parental leave.
Incapacity The incapacity referred to in subsection (2)(b) is an incapacity due to personal injury by accident for which an accident com- pensation earnings-related payment has been, is being, or will be paid.
Deﬁned in this Act: accident compensation earnings-related payment, civil union partner, de facto partner, employment, pay, pay period, spouse Compare: 2004 No 35 s OB 1 full-time earner Section MA 7(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 349(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MA 7(2)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 349(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MA 7 list of deﬁned terms employment: inserted (with effect on 1 April 2008), on 6 October 2009, by section 349(3) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
MA 8 Some deﬁnitions for family scheme In subparts MB to MF and MZ,— abating WFF tax credit means a tax credit under section MD 1 (Abating WFF tax credit) chief executive means the chief executive of the department currently responsible for administering the Social Security Act 1964 child tax credit means the component of the WFF tax credit that is calculated using the formula in section MZ 2 (Calcula- tion of child tax credit) family credit abatement means the component of the abating WFF tax credit that is calculated using the formula in section MD 13 (Calculation of family credit abatement) family scheme means all the entitlements and tax credits aris- ing under subparts MB to MF and MZ family scheme income means an amount calculated under subpart MB (Adjustment of net income for family scheme) on which an entitlement and a tax credit under the family scheme is based 1809 Part M s MA 8 Income Tax Act 2007 Reprinted as at 1 January 2010 family tax credit means the component of the abating WFF tax credit calculated using the formula in section MD 3 (Cal- culation of family tax credit) in-work tax credit means the component of the abating WFF tax credit calculated using the formula in section MD 10 (Cal- culation of in-work tax credit) minimum family tax credit means a tax credit under section ME 1 (Minimum family tax credit) New Zealand resident— (a) means ordinarily resident; and (b) include being lawfully resident does not include being unlawfully resident in New Zealand; and does not Zealand only through having— a visitor’s permit; or (i) a temporary work permit; or (ii) a permit to be in New Zealand for the purposes (iii) of study at a New Zealand school or university or other tertiary educational establishment in New (c) parental tax credit means the component of the abating WFF tax credit calculated using the formula in section MD 12 social assistance payment means— (a) (b) (c) (d) an income-tested beneﬁt; or a veteran’s pension; or New Zealand superannuation; or a basic grant or an independent
 circumstances grant, made under regulations made under section 193 of the Education Act 1964, section 303 of the Education Act 1989, or a substituted provision; or an accident compensation earnings-related payment, when the compensation relates to a day forming part of a continuous period of eligibility for the compensation and the day falls after the earlier of— (i) the day with the same date as the ﬁrst day of the continuous period of eligibility for compensation and occurring in the third calendar month after that ﬁrst day; and (e) 1810 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MA 8 (ii) the last day of the third calendar month after the ﬁrst day of the continuous period of eligibility for compensation.
WFF tax credit means a tax credit under either section MD 1 (Abating WFF tax credit) or ME 1 (Minimum family tax credit) Deﬁned in this Act: abating WFF tax credit, accident compensation earnings-re- lated payment, amount, child tax credit, Commissioner, entitlement period, family tax credit, income-tested beneﬁt, in-work payment, minimum family tax credit, net income, New Zealand, New Zealand superannuation, parental tax credit, relationship period, resident in New Zealand, tax credit, tax year, vet- eran’s pension, WFF tax credit Section MA 8 abating WFF tax credit: inserted, on 1 April 2008, by section 455(1)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MA 8 child tax credit: amended, on 1 April 2008, by section 455(1)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MA 8 family assistance credit: repealed, on 1 April 2008, by section 455(1)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MA 8 family credit abatement: amended, on 1 April 2008, by section 455(1)(d) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MA 8 family plus: repealed, on 1 April 2008, by section 455(1)(e) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MA 8 family support: repealed, on 1 April 2008, by section 455(1)(f) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MA 8 family tax credit: substituted, on 1 April 2008, by section 455(1)(g) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MA 8 in-work payment: repealed, on 1 April 2008, by section 455(1)(h) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MA 8 in-work tax credit: inserted, on 1 April 2008, by section 455(1)(h) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MA 8 minimum family tax credit: inserted, on 1 April 2008, by sec- tion 455(1)(i) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MA 8 net family scheme income: repealed, on 1 April 2008, by section 455(1)(j) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

1811 Part M s MB 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Section MA 8 parental tax credit: amended, on 1 April 2008, by section 455(1)(k) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MA 8 WFF tax credit: added, on 1 April 2008, by section 455(1)(l) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MA 8 list of deﬁned terms abating WFF tax credit: inserted, on 1 April 2008, by section 455(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MA 8 list of deﬁned terms full-time earner: repealed (with effect on 1 April 2008), on 6 October 2009, by section 350 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MA 8 list of deﬁned terms minimum family tax credit: inserted, on 1 April 2008, by section 455(2)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section MA 8 list of deﬁned terms WFF tax credit: inserted, on 1 April 2008, by section 455(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MA 8 list of deﬁned terms family assistance credit: repealed, on 1 April 2008, by section 455(2)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Subpart MB—Adjustment of net income for family scheme MB 1 Adjustments for calculation of family scheme income Assessable income derived at uniform daily rate To determine the net income (the family scheme income) on which the calculation of an entitlement and tax credit under the family scheme is based, the following paragraphs apply in relation to the assessable income derived by the person in a relationship period in an income year: (a) to the extent to which the income is derived from em- ployment during all or part of the income year, it is treated as derived at a uniform daily rate during the period of the employment; and to the extent to which the income is derived as an in- come-tested beneﬁt, it is treated as derived at a uniform daily rate during the period in the income year for which the beneﬁt is paid to the person; and despite section 38(1) of the Tax Administration Act 1994,— (b) (c) (1) 1812 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MB 1 (2) (3) (4) (5) (i) (ii) to the extent to which the income is derived other- wise than under paragraph (a) or (b), it is treated as derived at a uniform daily rate during the in- come year; and any expenditure incurred in deriving the income referred to in subparagraph (i) that is allowed as a deduction is treated as incurred at a uniform daily rate during the income year.
Exempt income included For the purposes of subsection (1), an amount referred to in section CW 28(1)(e) or CW 32 (which relate to overseas pen- sions and maintenance payments) derived by the person in the income year is not treated as exempt income.
Deduction For the purposes of subsection (1), the person is allowed a deduction for— (a) the amount of any payment, made by the person during the income year, of the kind referred to in section CW 32 (Maintenance payments); and the amount of any payment made by the person dur- ing the income year under section 27K of the Social Security Act 1964, as saved by section 256 of the Child Support Act 1991.
(b) Tax loss of qualifying company For the purposes of subsection (1), an amount of a tax loss of a qualifying company that is attributed to the person as a share- holder of the qualifying company under sections HA 20 and HA 24 (which relate to the treatment of tax losses of LAQCs) is not included in family scheme income.
Portfolio investor allocated income For the purposes of subsection (1), an amount of portfolio in- vestor allocated income that is not excluded income of the per- son and would be their excluded income in the absence of sec- tion CX 56(1)(b) and (c) (Portfolio investor allocated income and distributions of income by portfolio investment entities) is not included in family scheme income.
1813 Part M s MB 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Retirement scheme contributions (5B) For the purposes of subsection (1), an amount of retirement scheme contribution that is not excluded income of the person and would be their excluded income in the absence of section CX 50B(2) (Contributions to retirement savings schemes) is not included in family scheme income.
Amounts of depreciation loss on sale of building (5C) For the purposes of subsection (1), in relation to a building from the sale of which the person derives assessable income, an amount of depreciation loss allowed in the 2002–03 or ear- lier income year is not included in family scheme income.

However, this subsection does not apply to an amount of de- preciation loss of a business that under section MB 4 is treated as having no net income for the purposes of calculating family scheme income.
All known income sources The Commissioner must have regard to— (a) (b) the income from all sources known to the Commis- sioner; and if the person has been issued an income statement under Part 3A of the Tax Administration Act 1994, the sum of all amounts of assessable income included in an income statement issued to the person.

Transitional adjustments The amounts described in section MZ 2 (Calculation of child tax credit) are not included in the person’s family scheme in- come.
Deﬁned in this Act: amount, assessable income, business, Commissioner, de- duction, depreciation loss, excluded income, exempt income, family scheme, family scheme income, income, income from employment, income statement, income-tested beneﬁt, income year, LAQC, net income, pay, portfolio investor allocated income, qualifying company, relationship period, retirement scheme contribution, shareholder, tax credit, tax loss, tax year Compare: 2004 No 35 s KD 1(1)(a), (b), (e)(vii), (i), (3) Section MB 1(5): amended, on 1 April 2008, by section 456(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MB 1(5B) heading: inserted, on 1 April 2008, by section 456(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MB 1(5B): inserted, on 1 April 2008, by section 456(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(6) (7) 1814 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MB 3 Section MB 1(5C) heading: inserted (with effect on 1 April 2008), on 7 De- cember 2009, by section 84(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section MB 1(5C): inserted (with effect on 1 April 2008), on 7 December 2009, by section 84(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section MB 1 list of deﬁned terms business: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section MB 1 list of deﬁned terms depreciation loss: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Conse- quential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section MB 1 list of deﬁned terms retirement scheme contribution: inserted, on 1 April 2008, by section 456(3) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
MB 2 Adjustment for period that is less or more than 1 year (1) (2) Calculation of adjustment If a person’s income is calculated for a period that is less or more than a year, their family scheme income must be adjusted by an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) person’s family scheme income is the person’s income calculated under subparts MB to MF and MZ: days is the total number of days in the period for which the income has been derived.
(b) Deﬁned in this Act: amount, family scheme income, income, year Compare: 2004 No 35 s KD 1(4)–(6) MB 3 When person carries on 1 or more businesses (1) When this section applies This section applies for the purposes of determining the amount that represents the family scheme income of a person for an income year if— (a) the person carries on 1 or more businesses in the income year; and 1815 Part M s MB 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) (5) (b) the person derives an amount of income that would be their net income or net loss for the income year if the carrying on of the business or businesses were their only source of assessable income.
Calculation for each business The amount that would be the net income or the net loss of the person for the income year must be calculated for each business.

Net loss If a calculation referred to in subsection (2) is a net loss, the amount is treated as zero.
Depreciation of asset used in more than 1 business If, in the income year, an asset of the person is used in more than 1 business carried on by the person, the person must allo- cate expenditure or amounts of depreciation loss appropriately in relation to the use of the asset.
Businesses may be treated as single business The Commissioner may treat 2 or more businesses carried on by the person in the income year as a single business if the Commissioner considers that the businesses are of the kind that are normally carried on in association with each other.
Deﬁned in this Act: amount, assessable income, business, Commissioner, de- preciation loss, family scheme income, income, income year, net income, net loss Compare: 2004 No 35 s KD 1(1)(f), (2) MB 4 Family scheme income of major shareholders in close companies When this section applies This section applies for the purposes of determining the amount that represents the family scheme income of a person for an income year when the person is a major shareholder in a close company on the last day of the company’s balance date for ﬁnancial purposes.
If the company has paid the major shareholder a dividend in the income year, the amount of family scheme income calculated under subsection (2) is reduced by the total dividends paid for the income year.
(1) 1816 (2) (3) Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MB 5 What is included in family scheme income The person’s family scheme income includes an amount cal- culated using the formula— (b) (c) (b) Deﬁnition of items in formula In the formula,— (a) person’s shares is the number of shares issued by the company and held by the person, excluding ﬁxed-rate shares, on the last day of the company’s accounting year: company’s shares is the number of shares issued by the company, excluding ﬁxed-rate shares, on the last day of the company’s accounting year: company’s income is the net income of the company for the company’s accounting year.
Deﬁned in this Act: accounting year, amount, close company, dividend, family scheme income, income year, major shareholder, net income, share Compare: 2004 No 35 s KD 1(1)(g) Section MB 4(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 352(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
MB 5 Treatment of distributions from superannuation schemes (1) When this section applies This section applies when— (a) a person receives a distribution from a superannuation scheme in an income year; and an employer of the person has made contributions to the superannuation scheme in— (i) the income year in which the distribution was received; or the 2 income years immediately before that in- come year; and (ii) (c) the person continues to work for the employer for 1 month or more after the date of the distribution.
1817 Part M s MB 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) When this section does not apply This section does not apply to a person who receives a dis- tribution from a superannuation scheme as a result of and on or after the person’s retirement from employment with an em- ployer who was a contributor to the scheme.
Assessable income For the purposes of calculating family scheme income, the dis- tribution referred to in subsection (1) is assessable income of the person derived in the tax year or years that corresponds to the income year or years in which the contributions were made.

The amount does not include an amount attributable to a contribution by the person as a member of the superannu- ation scheme.
Deﬁned in this Act: assessable income, corresponding income year, employer, employment, family scheme income, income year, superannuation scheme, tax year Compare: 2004 No 35 s KD 1(1)(h) MB 6 Treatment of distributions from retirement savings schemes When this section applies This section applies when— (a) (b) (c) a person receives a distribution of a retirement scheme contribution from a retirement savings scheme in an in- come year; and RSCT has been withheld from the contribution; and at the time of the distribution, the person is— (i) not eligible for New Zealand superannuation; and eligible for a distribution of a retirement scheme contribution from a retirement scheme contribu- tor.
(ii) (1) 1818 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MC 1 (2) Assessable income For the purposes of calculating family scheme income, the dis- tribution is assessable income of the person derived in the in- come year in which the distribution is made.
Deﬁned in this Act: assessable income, family scheme income, income year, New Zealand superannuation, retirement savings scheme, retirement scheme contribution, retirement scheme contributor, RSCT Compare: 2004 No 35 s KD 1(1)(hb) Section MB 6: added, on 1 April 2008, by section 457 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Subpart MC—Entitlements under family scheme MC 1 What this subpart does (1) (2) Rules about entitlements under family scheme This subpart provides the rules for determining whether a per- son and their spouse, civil union partner, or de facto partner are entitled to WFF tax credits as entitlements and tax credits under the family scheme.
WFF tax credits The WFF tax credit is the amount of a person’s entitlement and tax credit made up of— (a) the family tax credit calculated under section MD 3 (Calculation of family tax credit): the in-work tax credit, see sections MD 4 to MD 10 (which relate to the entitlement to and calculation of the in-work tax credit), or the child tax credit continued under section MZ 1 (Entitlement to child tax credit): the parental tax credit, see sections MD 11 and MD 12 (which relate to the entitlement to and calculation of the parental tax credit): the minimum family tax credit, see section ME 1 (Min- imum family tax credit).
(b) (c) (d) (3) Classiﬁcation of credits For the purposes of the calculation of an amount of a WFF tax credit, entitlements and tax credits under the family scheme are divided into— 1819 Part M s MC 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) abating WFF tax credits, made up of the family tax credit, in-work tax credit or child tax credit, and the parental tax credit: the minimum family tax credit.
Classiﬁcation of credits [Repealed] [Repealed] Deﬁned in this Act: abating WFF tax credit, amount, child tax credit, civil union partner, Commissioner, de facto partner, family scheme, family tax credit, in-work tax credit, minimum family tax credit, parental tax credit, spouse, tax credit, WFF tax credit Compare: 2004 No 35 s KD 1A Section MC 1(1): amended, on 1 April 2008, by section 458(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 1(2) heading: substituted, on 1 April 2008, by section 458(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 1(2): substituted, on 1 April 2008, by section 458(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 1(3) heading: substituted, on 1 April 2008, by section 458(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 1(3): substituted, on 1 April 2008, by section 458(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 1(4) heading: repealed, on 1 April 2008, by section 458(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 1(4): repealed, on 1 April 2008, by section 458(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 1 list of deﬁned terms abating WFF tax credit: inserted, on 1 April 2008, by section 458(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 1 list of deﬁned terms family assistance credit: repealed, on 1 April 2008, by section 458(3)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section MC 1 list of deﬁned terms family plus: repealed, on 1 April 2008, by section 458(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 1 list of deﬁned terms family support: repealed, on 1 April 2008, by section 458(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 1 list of deﬁned terms in-work payment,: repealed, on 1 April 2008, by section 458(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 1 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 458(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(4) 1820 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MC 5 Section MC 1 list of deﬁned terms minimum family tax credit: inserted, on 1 April 2008, by section 458(3)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section MC 1 list of deﬁned terms WFF tax credit: inserted, on 1 April 2008, by section 458(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 1 compare note: amended (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 353 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

MC 2 Who qualiﬁes for entitlements under family scheme?

A person qualiﬁes for an entitlement under the family scheme if, for an entitlement period, they meet— (a) the qualifying criteria set out in sections MC 3 to MC 7; and the continuing requirements set out in section MC 8.
(b) Deﬁned in this Act: entitlement period, family scheme MC 3 First requirement: person’s age The ﬁrst requirement is that the person referred to in section MC 2 is 16 or older.

Compare: 2004 No 35 ss KD 2AA (4), KD 3(1), OB 1 qualifying person (a)(i) MC 4 Second requirement: principal care The second requirement is that the person referred to in sec- tion MC 2 is the principal caregiver for 1 or more dependent children.
Deﬁned in this Act: dependent child, principal caregiver Compare: 2004 No 35 ss KD 2AA (4), KD 3(1), OB 1 qualifying person (a)(ii) MC 5 Third requirement: residence (1) (2) Third requirement The third requirement is that either the person referred to in section MC 2 or the child referred to in section MC 4 meets the residence requirements of subsections (2) and (3), as ap- plicable.
When person meets residence requirements The person meets the residence requirements of subsection (1) if the person— 1821 Part M s MC 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) is a New Zealand resident who has been both resident and present in New Zealand for a continuous period of 12 months at any time, and is tax resident and resident in New Zealand on the date on which a tax credit arises under section MD 1 (Abating WFF tax credit) or ME 1 (Minimum family tax credit); and is not a transitional resident, and has not made an elec- tion under section HR 8(4) (Transitional residents), and is not the spouse, civil union partner, or de facto partner of a transitional resident.
When child meets residence requirements The child meets the residence requirements of subsection (1) if the child is both resident and present in New Zealand for the entitlement period.
Deﬁned in this Act: child, civil union partner, de facto partner, entitlement period, New Zealand, New Zealand resident, resident, spouse, tax credit, tran- sitional resident Compare: 2004 No 35 ss KD 3(1), OB 1 qualifying person (a)(iii) Section MC 5(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 354(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MC 5(2)(a): amended, on 1 April 2008, by section 459 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(3) MC 6 When person does not qualify Despite sections MC 3 to MC 5, a person does not qualify for— (a) an abating WFF tax credit if, during the relationship period, they receive a parent’s allowance under section 32(2) of the War Pensions Act 1954: an in-work tax credit, parental tax credit, or minimum family tax credit if, during the relationship period, they receive— (i) (ii) (iii) an income-tested beneﬁt; or [Repealed] a parent’s allowance.
(b) Deﬁned in this Act: abating WFF tax credit, income-tested beneﬁt, in-work tax credit, minimum family tax credit, parental tax credit, relationship period, veteran’s pension Compare: 2004 No 35 s KD 3(1), “qualifying person” 1822 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MC 7 Section MC 6(a): amended, on 1 April 2008, by section 460(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 6(b): amended, on 1 April 2008, by section 460(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 6(b)(ii): repealed (with effect on 1 April 2008), on 6 October 2009, by section 355(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MC 6 list of deﬁned terms abating WFF tax credit: inserted, on 1 April 2008, by section 460(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 6 list of deﬁned terms family assistance credit: repealed, on 1 April 2008, by section 460(3)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section MC 6 list of deﬁned terms family tax credit: repealed, on 1 April 2008, by section 460(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 6 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 460(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 6 list of deﬁned terms minimum family tax credit: inserted, on 1 April 2008, by section 460(3)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section MC 6 list of deﬁned terms parental tax credit: inserted, on 1 April 2008, by section 460(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 6 compare note: amended (with effect on 1 April 2008), on 6 Oc- tober 2009, by section 355(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).
MC 7 When spouse or partner entitled under family scheme (1) When this section applies This section applies when a person has a spouse, civil union partner, or de facto partner throughout an entitlement period, and during the period— (a) the person meets the criteria in sections MC 3 to MC 5 in relation to 1 or more dependent children; and the spouse or partner meets the criteria in sections MC 3 to MC 5 in relation to 1 or more dependent children; and the dependent child, or at least 1 of the dependent chil- dren, referred to in paragraph (b) is not a dependent child referred to in paragraph (a).
(b) (c) 1823 Part M s MC 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Single person In the circumstances described in subsection (1),— (a) this section applies as if— (i) (ii) the person or their spouse or partner meets the qualifying criteria in relation to all those chil- dren; and the other person does not meet the qualifying cri- teria in relation to any of the children; and for all WFF tax credits other than the in-work tax credit, the Commissioner must determine which of the persons referred to in paragraph (a) meets the qualifying criteria.
Deﬁned in this Act: civil union partner, Commissioner, de facto partner, de- pendent child, entitlement period, spouse Compare: 2004 No 35 s KD 3A(2)–(4) (b) Section MC 7(2)(b): amended, on 1 April 2008, by section 461 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MC 8 Continuing requirements Requirements for entitlement period To receive entitlements and tax credits under the family scheme, a person who meets the qualifying criteria set out in sections MC 3 to MC 7 must also meet the following requirements throughout the entitlement period: (a) the person meets the qualifying criteria on each day of the period; and another person does not on any day start or stop being a spouse, civil union partner, or de facto partner of the person; and the person does not start or stop being the principal care- giver of a dependent child other than on the ﬁrst or, as applicable, the last day; and a child for whom the person is the principal caregiver does not stop being a dependent child other than on the ﬁrst or, as applicable, the last day; and the composition of a WFF tax credit does not change, other than on the ﬁrst, or as applicable, the last day; and the person does not start or stop being a person receiving protected family tax credit, other than on the ﬁrst, or as applicable, the last day.
(b) (c) (d) (e) (f) (1) 1824 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MC 9 (2) Relationship with section MD 6(2) Section MD 6(2) (Second requirement: principal care) over- rides this section in relation to the in-work tax credit.
Deﬁned in this Act: child, civil union partner, de facto partner, dependent child, entitlement period, family scheme, in-work tax credit, principal caregiver, pro- tected family tax credit, spouse, tax credit, WFF tax credit Compare: 2004 No 35 s OB 1 eligible period Section MC 8(1) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 356(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MC 8(e): amended, on 1 April 2008, by section 462(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 8(f): amended, on 1 April 2008, by section 462(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 8(2) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 356(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MC 8(2): added (with effect on 1 April 2008), on 6 October 2009, by section 356(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MC 8 list of deﬁned terms family assistance credit: repealed, on 1 April 2008, by section 462(3)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section MC 8 list of deﬁned terms in-work tax credit: inserted (with effect on 1 April 2008), on 6 October 2009, by section 356(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MC 8 list of deﬁned terms protected family support: repealed, on 1 April 2008, by section 462(3)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section MC 8 list of deﬁned terms protected family tax credit: inserted, on 1 April 2008, by section 462(3)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section MC 8 list of deﬁned terms WFF tax credit: inserted, on 1 April 2008, by section 462(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MC 9 Credits for person aged 18 (1) For person aged 18 A person is entitled to a tax credit under sections MD 1 (Abat- ing WFF tax credit) and ME 1 (Minimum family tax credit) for a person aged 18 who— (a) is not ﬁnancially independent; and 1825 Part M s MC 10 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (b) is attending school or a tertiary educational establish- ment.
Determining period The Commissioner must determine the period for which a per- son is entitled to an abating WFF tax credit or a minimum fam- ily tax credit for a person who is 18 years of age.

When period expires The period determined by the Commissioner ends on or be- fore the ﬁrst day ﬁxed by the Commissioner for payments of instalments of tax credits under section 80KI of the Tax Ad- ministration Act 1994 in the calendar year following that in which the person turns 18 years of age.
Deﬁned in this Act: abating WFF tax credit, Commissioner, family tax credit, ﬁnancially independent, minimum family tax credit, pay, tax credit, year Compare: 2004 No 35 ss KD 2AA(7)–(10), KD 3A(5)–(9) Section MC 9(1): amended, on 1 April 2008, by section 463(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 9(2): amended, on 1 April 2008, by section 463(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 9 list of deﬁned terms abating WFF tax credit: inserted, on 1 April 2008, by section 463(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 9 list of deﬁned terms family assistance credit: repealed, on 1 April 2008, by section 463(3)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section MC 9 list of deﬁned terms minimum family tax credit: inserted, on 1 April 2008, by section 463(3)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
MC 10 Principal caregiver General meaning A principal caregiver, for a dependent child,— (a) means the person, whether or not a parent of the child, who the Commissioner considers has the primary re- sponsibility for the day-to-day care for the child, other than on a temporary basis: does not include— (i) (ii) a body of persons, incorporated or otherwise: the spouse, civil union partner, or de facto partner of a person eligible to be a transitional resident (b) (1) 1826 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MC 10 (iii) who has not made an election under section HR 8(4) (Transitional residents): a person who is the proprietor of, or employed in, a residence established under the Children, Young Persons, and Their Families Act 1989, or a residential disability care institution as de- ﬁned in section 58(4) of the Health and Disability Services (Safety) Act 2001, or another institution in which a child is cared for.
(2) (3) (4) Meaning for abating WFF tax credit, family tax credit, child tax credit For the purposes of sections MD 3 and MZ 1 (which relate to family tax credit and the child tax credit), a person is a principal caregiver of a dependent child if the person— (a) lives apart from another person who qualiﬁes under sec- tion MC 2 in relation to the dependent child; and has the dependent child in their exclusive care for periods totalling at least one-third of— (i) (ii) (iii) a 4-month period: the tax year: the entitlement period, in the case of the parental tax credit.
(b) Meaning for in-work tax credit For the purposes of section MD 6 (Second requirement: prin- cipal care), a person is a principal caregiver of a dependent child for an entitlement period if the person— (a) lives apart from another person who qualiﬁes under sec- tion MC 2 in relation to the dependent child; and has the dependent child in their exclusive care for periods, whether or not they coincide with the entitle- ment period, totalling at least one-third of a 4-month period or the tax year.
(b) Entitlement to in-work tax credit If subsection (3) applies, section MD 10(3) (Calculation of in-work tax credit) is to be read as applying to the periods during which the principal caregiver has exclusive care of the dependent child.
1827 Part M s MC 10 Income Tax Act 2007 Reprinted as at 1 January 2010 Meaning for parental tax credit For the purposes of section MD 11 (Entitlement to parental tax credit), a person is a principal caregiver of a dependent child if the person— (a) lives apart from another person who qualiﬁes under sec- tion MC 2 in relation to the dependent child; and has the dependent child in their exclusive care for periods totalling at least one-third of the parental en- titlement period.
(b) Principal caregiver to notify Commissioner of change A person who is a principal caregiver under this section must notify the Commissioner immediately of a change in the ar- rangements for the care of the child that has, or will have, the effect of ending the person’s status as a principal caregiver.
Deﬁned in this Act: abating WFF tax credit, child tax credit, civil union partner, Commissioner, de facto partner, dependent child, entitlement period, family tax credit, in-work tax credit, notify, parental entitlement period, parental tax credit, principal caregiver, spouse, tax year, transitional resident Compare: 2004 No 35 ss KD 2AA(2)–(3), OB 1 principal caregiver Section MC 10(2) heading: amended, on 1 April 2008, by section 464(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 10(2): amended, on 1 April 2008, by section 464(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 10(3) heading: amended, on 1 April 2008, by section 464(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 10(4) heading: amended, on 1 April 2008, by section 464(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 10(4): amended (with effect on 1 April 2008), on 6 October 2009, by section 357(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MC 10(4): amended, on 1 April 2008, by section 464(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 10 list of deﬁned terms abating WFF tax credit: inserted, on 1 April 2008, by section 464(6)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section MC 10 list of deﬁned terms family assistance credit: repealed, on 1 April 2008, by section 464(6)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section MC 10 list of deﬁned terms family support: repealed, on 1 April 2008, by section 464(6)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

(5) (6) 1828 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MD 1 Section MC 10 list of deﬁned terms family tax credit: inserted, on 1 April 2008, by section 464(6)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 10 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 464(6)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 10 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 464(6)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MC 11 Relationship periods and entitlement periods (1) (2) Meaning In subparts MB to MF and MZ,— (a) (b) a relationship period means an unbroken period in a tax year, whether the period consists of some or all of the days in the tax year: an entitlement period, for a person, means a period that forms all or part of a relationship period during which the person meets the continuing requirements set out in section MC 8.
When day included in more than 1 period If a day is part of more than 1 entitlement period or 1 rela- tionship period, the day is treated as part only of the particular period that the Commissioner determines is fair in the circum- stances.
Deﬁned in this Act: Commissioner, entitlement period, relationship period, tax year Compare: 2004 No 35 ss KD 2AA(1), (11), OB 1 eligible period, speciﬁed period Subpart MD—Abating WFF tax credits Subpart MD heading: substituted, on 1 April 2008, by section 465 of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Calculating amount of credit MD 1 Abating WFF tax credit (1) Tax credit A person who qualiﬁes under section MC 2 (Who qualiﬁes for entitlements under family scheme?)
is entitled to a tax credit 1829 Part M s MD 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (the abating WFF tax credit) equal to an amount calculated using the formula in subsection (2).

Formula The formula is— family tax credit + (in-work tax credit or child tax credit) + parental tax credit – credit abatement.
Deﬁnition of items in formula In the formula,— (a) (2) (3) (b) (c) (d) family tax credit is the family tax credit for the entitle- ment period calculated using the formula in section MD 3: in-work tax credit or child tax credit is 1 of the fol- lowing, as applicable: (i) the in-work tax credit for the entitlement period calculated using the formula in section MD 10, if the person is entitled to the in-work tax credit for the entitlement period: the amount of child tax credit for the entitlement period calculated using the formula in section MZ 2 (Calculation of child tax credit), if the per- son is not entitled to the in-work tax credit for the entitlement period, and is entitled to the child tax credit for the entitlement period under section MZ 1 (Entitlement to child tax credit): (ii) parental tax credit is the amount of parental tax credit for the entitlement period calculated using the formula in section MD 12: credit abatement is the total amount, for the entitle- ment period, of— (i) a family credit abatement calculated using the formula in section MD 13(2) other than an amount used as described in section MD 16(3)(b); and a parental tax credit abatement calculated using the formula in section MD 16(2).
(ii) 1830 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MD 1 (4) Extra instalment This section is overridden by section 80KW of the Tax Ad- ministration Act 1994.
Deﬁned in this Act: abating WFF tax credit, amount, child tax credit, entitle- ment period, family credit abatement, family tax credit, in-work tax credit, parental tax credit, tax credit Compare: 2004 No 35 s KD 2(1), (2) Section MD 1 heading: substituted, on 1 April 2008, by section 466(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 1(1): amended, on 1 April 2008, by section 466(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 1(2) formula: amended, on 1 April 2008, by section 466(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 1(2) formula: amended, on 1 April 2008, by section 466(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 1(2) formula: amended, on 1 April 2008, by section 466(3)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 1(3)(a): amended, on 1 April 2008, by section 466(4) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 1(3)(b): amended, on 1 April 2008, by section 466(5) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 1(3)(b)(i): amended, on 1 April 2008, by section 466(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 1(3)(b)(ii): amended, on 1 April 2008, by section 466(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 1(3)(d): substituted, on 1 April 2008, by section 466(6) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 1 list of deﬁned terms abating WFF tax credit: inserted, on 1 April 2008, by section 466(7)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 1 list of deﬁned terms family support: repealed, on 1 April 2008, by section 466(7)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 1 list of deﬁned terms family tax credit: inserted, on 1 April 2008, by section 466(7)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 1 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 466(7)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 1 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 466(7)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1831 Part M s MD 2 Income Tax Act 2007 Reprinted as at 1 January 2010 MD 2 Calculating net contributions to credits When this section applies This section applies when the Commissioner calculates the amounts making up the family tax credit, the in-work tax credit, the child tax credit, and the parental tax credit that relate to a period under this subpart.
Calculating net contributions The Commissioner must— (a) (b) (c) treat the family tax credit, the in-work tax credit, the child tax credit, and the parental tax credit as tax credits corresponding to the period; and treat as a debit the amount of family credit abatement corresponding to the period; and apply the amount of the family credit abatement corres- ponding to the period,— (i) ﬁrst, to reduce the amount of the family tax credit corresponding to the period; and second, to reduce the amount of the in-work tax credit or, as applicable, the child tax credit cor- responding to the period; and third, to reduce the amount of the parental tax credit corresponding to the period.
(ii) (iii) Credit abatements Section MD 16 overrides this section in relation to the amount of the family credit abatement and the parental tax credit abate- ment.

Deﬁned in this Act: amount, child tax credit, Commissioner, family credit abatement, family tax credit, in-work tax credit, parental tax credit, tax credit Compare: 2004 No 35 s KD 2A Section MD 2(1): amended, on 1 April 2008, by section 467(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 2(2)(a): amended, on 1 April 2008, by section 467(2) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 2(2)(c)(i): amended, on 1 April 2008, by section 467(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 2(2)(c)(ii): amended, on 1 April 2008, by section 467(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 2(3) heading: added, on 1 April 2008, by section 467(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

(1) (2) (3) 1832 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MD 3 Section MD 2(3): added, on 1 April 2008, by section 467(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 2 list of deﬁned terms family support: repealed, on 1 April 2008, by section 467(6)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 2 list of deﬁned terms family tax credit: inserted, on 1 April 2008, by section 467(6)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 2 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 467(6)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 2 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 467(6)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Family tax credit Heading: substituted, on 1 April 2008, by section 468(1) of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

MD 3 Calculation of family tax credit (1) Entitlement A person who qualiﬁes under section MC 2 (Who qualiﬁes for entitlements under family scheme?)

is entitled to an amount of family tax credit calculated using the formula in subsection (2).
Formula The formula is— (2) (3) (4) Deﬁnition of items in formula The items in the formula are deﬁned in subsections (4) and (5).
Prescribed amount Prescribed amount is the sum of the following amounts: (a) for the eldest dependent child for whom the person is a principal caregiver during the entitlement period, 1 of the following, as applicable: (i) (ii) $4,487, if the child is younger than 16: $5,198, if the child is 16 or older: 1833 Part M s MD 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (iii) a weighted average of the amounts in subpara- graphs (i) and (ii) that reﬂects the proportion of the period for which those subparagraphs apply to the child, if the child turns 16 during the en- titlement period; and (b) for each dependent child for whom the person is a prin- cipal caregiver during the entitlement period, other than the eldest dependent child, 1 of the following, as applic- able: (i) (ii) (iii) (iv) $3,119, if the child is younger than 13: $3,557, if the child is 13, 14, or 15: $4,651, if the child is 16 or older: a weighted average of the amounts in subpara- graphs (i) and (ii) that reﬂects the proportion of the period for which those subparagraphs apply to the child, if the child turns 13 during the en- titlement period: a weighted average of the amounts in subpara- graphs (ii) and (iii) that reﬂects the proportion of the entitlement period for which those subpara- graphs apply to the child, if the child turns 16 during the entitlement period.
(v) Days Days is the number of days in the entitlement period.

Order in Council increasing amount In subsection (4)(a)(i) and (ii), and (b)(i) to (iii), the amount referred to may be increased as prescribed by the Governor- General by Order in Council under section MF 7 (Orders in Council).
When another person cares for dependent child A family tax credit must be reduced in proportion to the time in the entitlement period that a dependent child spends in the exclusive care of another person who qualiﬁes under section MC 2.
Deﬁned in this Act: amount, child, dependent child, entitlement period, family tax credit, principal caregiver Compare: 2004 No 35 ss KD 2(3), KD 2AA(3) Section MD 3 heading: amended, on 1 April 2008, by section 468(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(5) (6) (7) 1834 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MD 3 Section MD 3(1): amended, on 1 April 2008, by section 468(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 3(4)(a)(i): amended, on 1 April 2009, by section 5(2)(a) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section MD 3(4)(a)(i): amended (with effect from 1 April 2008), on 29 May 2008, by section 5(1)(a) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section MD 3(4)(a)(ii): amended, on 1 April 2009, by section 5(2)(b) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section MD 3(4)(a)(ii): amended (with effect from 1 April 2008), on 29 May 2008, by section 5(1)(b) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section MD 3(4)(b)(i): amended, on 1 April 2009, by section 5(2)(c) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section MD 3(4)(b)(i): amended (with effect from 1 April 2008), on 29 May 2008, by section 5(1)(c) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section MD 3(4)(b)(ii): amended, on 1 April 2009, by section 5(2)(d) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section MD 3(4)(b)(ii): amended (with effect from 1 April 2008), on 29 May 2008, by section 5(1)(d) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section MD 3(4)(b)(iii): amended, on 1 April 2009, by section 5(2)(e) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section MD 3(4)(b)(iii): amended (with effect from 1 April 2008), on 29 May 2008, by section 5(1)(e) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section MD 3(7): amended, on 1 April 2008, by section 468(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MC 3 list of deﬁned terms family support: repealed, on 1 April 2008, by section 468(5)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MC 3 list of deﬁned terms family tax credit: inserted, on 1 April 2008, by section 468(5)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
In-work tax credit Heading: substituted, on 1 April 2008, by section 469(1) of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

1835 Part M s MD 4 Income Tax Act 2007 Reprinted as at 1 January 2010 MD 4 Entitlement to in-work tax credit (1) (2) Requirements A person is entitled to an in-work tax credit for a child if, for an entitlement period, the person meets the 5 requirements of sections MD 5 to MD 9.
When another person entitled to in-work tax credit or child tax credit If 2 persons are entitled to an in-work tax credit or a child tax credit for a child for an entitlement period, the entitlement of each is not affected by the entitlement of the other person.
Deﬁned in this Act: child, entitlement period, in-work tax credit Compare: 2004 No 35 s KD 2AAA(1), (3A) Section MD 4 heading: amended, on 1 April 2008, by section 469(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 4(1): amended, on 1 April 2008, by section 469(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 4(2) heading: amended, on 1 April 2008, by section 469(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 4(2): amended, on 1 April 2008, by section 469(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 4 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 469(6)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 4 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 469(6)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

MD 5 First requirement: person’s age The ﬁrst requirement for an entitlement to an in-work tax credit is that the person referred to in section MD 4 is 16 or older.
Deﬁned in this Act: in-work tax credit Compare: 2004 No 35 s KD 2AAA(1)(a) Section MD 5: amended, on 1 April 2008, by section 470(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 5 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 470(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 5 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 470(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1836 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MD 7 MD 6 Second requirement: principal care (1) (2) (3) When child ﬁnancially dependent The second requirement for an entitlement to an in-work tax credit is that the person referred to in section MD 4 is the principal caregiver for a child who is ﬁnancially dependent on them.
Inclusions A child for whom payments are made under section 363 of the Children, Young Persons, and Their Families Act 1989, or a child for whom a beneﬁt is paid under section 28 or 29 of the Social Security Act 1964, is treated as ﬁnancially dependent on the person.

Relationship with section MC 8 Subsection (2) overrides section MC 8 (Continuing require- ments).
Deﬁned in this Act: child, in-work tax credit, principal caregiver Compare: 2004 No 35 s KD 2AAA(1)(b) Section MD 6(1): amended, on 1 April 2008, by section 471(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 6(3) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 358(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MD 6(3): added (with effect on 1 April 2008), on 6 October 2009, by section 358(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MD 6 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 471(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 6 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 471(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

MD 7 Third requirement: residence (1) Third requirement The third requirement for an entitlement to an in-work tax credit is that the person or child referred to in section MD 4 meet the residence requirements of subsections (2) and (3), as applicable.
1837 Part M s MD 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) When person meets residence requirements The person meets the residence requirements of subsection (1) if the person— (a) is a New Zealand resident who has been both resident and present in New Zealand for a continuous period of 12 months at any time, and is tax resident and resident in New Zealand on the date on which a tax credit arises under section MD 1; and is neither a transitional resident, nor the spouse, civil union partner, or de facto partner of a transitional resi- dent.
(b) When child meets residence requirements The child meets the residence requirements of subsection (1) if the child is both resident and present in New Zealand for the entitlement period.
Deﬁned in this Act: child, civil union partner, de facto partner, entitlement period, in-work tax credit, New Zealand, New Zealand resident, resident, spouse, tax credit, transitional resident Compare: 2004 No 35 s KD 2AAA(1)(c), (3), (4) Section MD 7(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 359(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MD 7(1): amended, on 1 April 2008, by section 472(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 7 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 472(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 7 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 472(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MD 8 Fourth requirement: person not receiving beneﬁt The fourth requirement for an entitlement to an in-work tax credit is that the person referred to in section MD 4 and their spouse, civil union partner, or de facto partner, do not re- ceive— (a) (b) an income-tested beneﬁt; or a basic grant and an independent circumstances grant made under regulations made under section 193 of the Education Act 1964, section 303 of the Education Act 1989, or an enactment substituted for those sections; or 1838 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MD 9 (c) a parent’s allowance under section 32(2) of the War Pensions Act 1954.
Deﬁned in this Act: civil union partner, de facto partner, income-tested beneﬁt, in-work tax credit, spouse Compare: 2004 No 35 s KD 2AAA(1)(e) Section MD 8: amended, on 1 April 2008, by section 473(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 8 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 473(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 8 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 473(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MD 9 Fifth requirement: full-time earner (1) (2) Income from employment or compensation The ﬁfth requirement for an entitlement to an in-work tax credit is that either or both the person referred to in section MD 4 and their spouse, civil union partner, or de facto partner, is normally a full-time earner receiving income from a work activity, and derives— (a) income as set out in subsections (2) and (3) as a fulltime earner; or an amount of compensation described in subsection (4).
(b) Income The income referred to in subsection (1)(a) is— a PAYE income payment that is— (a) (i) not excluded under subsection (3), although it does not matter if the person also derives income of the type described in subsection (3); and not a beneﬁt or allowance described in section MD 8; or (ii) (b) (c) (d) income to which section RD 3(2) to (4) (PAYE income payments) applies; or income from a business carried on for proﬁt; or an amount paid or beneﬁt provided— (i) by a person (the claimant), who receives a per- sonal service rehabilitation payment from which an amount of tax has been withheld at the rate speciﬁed in schedule 4, part I (Rates of tax for 1839 Part M s MD 9 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) schedular payments) or under section RD 18 (Schedular payments without notiﬁcation); and to another person for providing to the claimant a key aspect of social rehabilitation referred to in paragraph (c) of the deﬁnition of personal service rehabilitation payment in section YA 1 (Deﬁnitions).
Exclusions from income The following PAYE income payments are excluded from in- come under subsection (2): (a) a payment referred to in paragraphs (a) to (c) of the deﬁnition of accident compensation earnings-related payment: a PAYE income payment referred to in section RD 5(6)(a) (Salary or wages), other than a parental leave payment referred to in section CF 1 (Beneﬁts, pensions, compensation, and government grants): a PAYE income payment RD 5(6)(b)(ii), (iii), or (iv): a schedular payment that is a contract payment for a contract activity or service of a non-resident contractor: an amount paid as a result of incapacity, suffered be- fore 1 January 2006, due to personal injury by accident within the meaning of section 26 of the Injury Preven- tion, Rehabilitation, and Compensation Act 2001. referred to in section Compensation payments for personal injury A person meets the ﬁfth requirement if— (a) they receive a child tax credit for an entitlement period ending on 31 March 2006; and on or after 1 January 2006, they or their spouse, civil union partner, or de facto partner suffers an incapacity due to personal injury by accident within the meaning of section 26 of the Injury Prevention, Rehabilitation, and Compensation Act 2001; and weekly compensation within the meaning of sec- tion 6 of the Injury Prevention, Rehabilitation, and Compensation Act 2001, is or will be paid for the incapacity; and (b) (c) (d) (e) (b) (c) (3) (4) 1840 Reprinted as at 1 January 2010 (d) Income Tax Act 2007 Part M s MD 9 the person
 or their spouse, civil union partner, or de facto partner would have met the ﬁfth requirement in deriving income as a full-time earner under subsection (1)(a) and been eligible for the tax credit calculated us- ing the formula in section MD 10 at the time of the in- capacity had this section come into force before the date of the incapacity.
(5) Absence from work due to birth of child Despite subsection (1), a person also meets the ﬁfth require- ment if they are normally a full-time earner as described in subsection (1)(a) but, in a 1-week period, they do not work, or work less than, the number of hours required to be a full-time earner because of the birth of a child.

However, this subsec- tion applies only if the person is entitled to receive the parental tax credit for the child.
Deﬁned in this Act: amount, business, child, child tax credit, civil union part- ner, contract activity or service, contract payment, de facto partner, entitle- ment period, full-time earner, income, income from employment, in-work tax credit, non-resident contractor, parental tax credit, pay, PAYE income payment, schedular payment, spouse, tax credit Compare: 2004 No 35 s KD 2AAA(1)(d), (5)–(8) Section MD 9(1): amended, on 1 April 2008, by section 474(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 9(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 360(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MD 9(2)(c): amended (with effect on 1 July 2008), on 6 October 2009, by section 360(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MD 9(2)(d): added (with effect on 1 July 2008), on 6 October 2009, by section 360(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MD 9(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 360(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MD 9 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 474(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 9 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 474(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1841 Part M s MD 10 Income Tax Act 2007 Reprinted as at 1 January 2010 MD 10 Calculation of in-work tax credit (1) Entitlement A person who meets the requirements of section MD 4 is en- titled to an in-work tax credit calculated using the formula in subsection (2).
Formula The formula is— (2) Deﬁnition of items in formula In the formula,— (a) (b) (c) amount A is $3,120: amount B is $780: children is the greater of— (i) (ii) 3; and the number of children for whom the person is allowed the in-work tax credit: (d) weekly periods— (i) for 2 or more entitlement periods forming 1 con- tinuous period, is the number of whole periods of 1 week in the continuous period for which the person or their spouse, civil union partner, or de facto partner has, from the work activity, income to which MD 9(2) refers: for an entitlement period to which paragraph (i) does not apply, is the number of whole periods of 1 week in the entitlement period for which the person or their spouse, civil union partner, or de facto partner has, from the work activity, income to which section MD 9(2) refers.
(ii) Order in Council increasing amount In subsection (3)(a) and (b), the amount referred to may be increased as prescribed by the Governor-General by Order in Council under section MF 7 (Orders in Council).
Deﬁned in this Act: amount, child, civil union partner, de facto partner, entitle- ment period, in-work tax credit, spouse Compare: 2004 No 35 s KD 2AAA(2) (3) (4) 1842 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MD 11 Section MD 10 heading: amended, on 1 April 2008, by section 475(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 10(1): amended, on 1 April 2008, by section 475(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 10(3)(c)(ii): amended, on 1 April 2008, by section 475(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 10(3)(d)(ii): amended (with effect on 1 April 2008), on 6 October 2009, by section 361(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section MD 10 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 475(4)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 10 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 475(4)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Parental tax credit MD 11 Entitlement to parental tax credit (1) When this section applies This section applies when— (a) (b) a person qualiﬁes under section MC 2 (Who qualiﬁes for entitlements under family scheme?)
in relation to a dependent child; and neither the person nor their spouse, civil union partner, or de facto partner receives— (i) a social assistance payment or has a suspended entitlement to an income-tested beneﬁt at any time during the ﬁrst 56 days after the date of the dependent child’s birth (the parental entitle- ment period); or a parental leave payment under Part 7A of the Parental Leave and Employment Protection Act 1987 at any time for the child.
(ii) (2) (3) Entitlement The person is entitled to a parental tax credit for the parental entitlement period.

If dependent child dies during parental entitlement period The person continues to be entitled to the parental tax credit if— 1843 Part M s MD 11 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) the dependent child dies during the parental entitlement period; and the person and their spouse, civil union partner, or de facto partner otherwise meet the requirements of sub- section (1).
When another person cares for dependent child The parental tax credit must be reduced in proportion to the time in the parental entitlement period that a dependent child spends in the exclusive care of another person who qualiﬁes under section MC 2.
Relationship with section 2B of Parental Leave and Employment Protection Act 1987 Section 2B of the Parental Leave and Employment Protection Act 1987 applies for the purposes of subsection (1)(b) if a per- son— (a) gives birth to 2 or more children as a result of 1 preg- nancy; or assumes the care of 2 or more children with a view to adoption.
(b) Payment of parental tax credit The parental tax credit is paid to the person either— as a tax credit in an end-of-year assessment; or (a) in the 56 days after the date on which an application is (b) made if— (i) (ii) the person applies to receive the parental tax credit by instalment under section MF 1 (Appli- cation for payment of tax credit by instalment); and at any time during the period of 56 days, the per- son and their spouse, civil union partner, or de facto partner do not receive a social assistance payment and do not have a suspended entitlement to an income-tested beneﬁt.
Deﬁned in this Act: assessment, civil union partner, de facto partner, depend- ent child, income-tested beneﬁt, parental entitlement period, parental tax credit, social assistance payment, spouse, tax credit Compare: 2004 No 35 ss KD 2AA(3), KD 2AB (4) (5) (6) 1844 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MD 13 MD 12 Calculation of parental tax credit (1) Entitlement A person who meets the requirements of section MD 11 is entitled to a parental tax credit calculated using the formula in subsection (2).
Formula The formula is— (2) (3) (4) Deﬁnition of items in formula In the formula,— (a) (b) prescribed amount is $1,200 for each dependent child born on or after 1 October 1999: days is the number of days in the parental entitlement period, up to a maximum of 56 days, for which the per- son and their spouse, civil union partner, or de facto partner do not receive a social assistance payment and do not have a suspended entitlement to an income-tested beneﬁt.
Order in Council increasing amount In subsection (3)(a), the amount referred to may be increased as prescribed by the Governor-General by Order in Council under section MF 7 (Orders in Council).
Deﬁned in this Act: amount, civil union partner, de facto partner, dependent child, income-tested beneﬁt, parental entitlement period, parental tax credit, so- cial assistance payment, spouse Compare: 2004 No 35 s KD 2(5) Credit abatement Heading: substituted, on 1 April 2008, by section 476(1) of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
MD 13 Calculation of family credit abatement (1) When this section applies This section applies for the purposes of section MD 1 to deter- mine the amount of a person’s family credit abatement for an entitlement period.
1845 Part M s MD 13 Income Tax Act 2007 Reprinted as at 1 January 2010 Formula The formula is— (2) (3) (4) Deﬁnition of items in formula In the formula,— (a) full-year abatement is,— (i) (ii) if the person has no spouse, civil union part- ner, or de facto partner during the entitlement period, and the person’s family scheme income for the relationship period containing the entitle- ment period is more than $36,827, 20 cents for each complete dollar of the excess; or if the person has a spouse, civil union partner, or de facto partner during the entitlement period, and the person’s family scheme income, the fam- ily scheme income of their spouse, civil union partner, or de facto partner, or the sum of those in- comes for the relationship period containing the entitlement period is more than $36,827, 20 cents for each complete dollar of the excess: (b) days is the number of days in the entitlement period excluding the days of any calendar months in which the person receives protected family tax credit as described in section MD 14.
When 56-day period includes 31 March If a person who qualiﬁes under section MC 2 (Who qualiﬁes for entitlements under family scheme?)
receives fortnightly instalments of the parental tax credit in a 56-day period that includes 31 March, the formula is applied so that— (a) instalments of the parental tax credit received in the ﬁrst tax year are abated against the person’s family scheme income, the family scheme income of their spouse, civil union partner, or de facto partner, or the sum of those incomes for that tax year; and instalments of the parental tax credit received in the second tax year are abated against the person’s fam- ily scheme income, the family scheme income of their (b) 1846 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MD 14 (5) spouse, civil union partner, or de facto partner, or the sum of those incomes for that tax year.
Order in Council increasing amount In subsection (3)(a), the amounts referred to may be increased as prescribed by the Governor-General by Order in Council under section MF 7 (Orders in Council).
Deﬁned in this Act: amount, civil union partner, de facto partner, entitlement period, family credit abatement, family scheme income, parental tax credit, pro- tected family tax credit, relationship period, spouse, tax year Compare: 2004 No 35 s KD 2(6), (7) Section MD 13(3)(a)(i): amended, on 1 April 2009, by section 6(2) of the Taxa- tion (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section MD 13(3)(a)(i): amended (with effect from 1 April 2008), on 29 May 2008, by section 6(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section MD 13(3)(a)(ii): amended, on 1 April 2009, by section 6(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section MD 13(3)(a)(ii): amended (with effect from 1 April 2008), on 29 May 2008, by section 6(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section MD 13(3)(b): amended, on 1 April 2008, by section 476(2) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 13 list of deﬁned terms protected family support: repealed, on 1 April 2008, by section 476(3)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section MD 13 list of deﬁned terms protected family tax credit: inserted, on 1 April 2008, by section 476(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MD 14 Person receiving protected family tax credit (1) Requirements For the purposes of section MD 13(3)(b), a person who re- ceives protected family tax credit for a calendar month in an entitlement period, is a person who, in the calendar month,— has no spouse, civil union partner, or de facto partner, (a) receives an income-tested beneﬁt, and derives family scheme income that is less than the amount set out in section MD 13(3)(a)(i): has a spouse, civil union partner, or de facto partner, receives an income-tested beneﬁt, and derives family (b) 1847 Part M s MD 15 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) scheme income that together with the family scheme income of their spouse is less in total than the amount set out in section MD 13(3)(a)(ii).
Annualised equivalent Section MB 2 (Adjustment for period that is less or more than 1 year) applies to adjust the amount of family scheme income to provide an annualised equivalent.
Deﬁned in this Act: amount, civil union partner, de facto partner, entitlement period, family scheme income, income-tested beneﬁt, protected family tax credit, spouse Compare: 2004 No 35 s KD 2(6B) Section MD 14 heading: amended, on 1 April 2008, by section 477(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MD 14(1): amended, on 1 April 2008, by section 477(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MD 14 list of deﬁned terms protected family support: repealed, on 1 April 2008, by section 477(3)(b) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section MD 14 list of deﬁned terms protected family tax credit: inserted, on 1 April 2008, by section 477(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MD 15 Family scheme income for purposes of section MD 14 (b) (c) For the purposes of section MD 14, in the calculation of family scheme income,— (a) section MB 1(1)(a) and (b) (Adjustments for calcula- tion of family scheme income) does not apply; and any income from employment that is derived in the cal- endar month as a result of an extra pay period that oc- curs in that month is disregarded; and for a person who derives, for part of an income year, income to which section RD 3(2) to (4) (PAYE income payments) applies, or income from a business, the as- sessable income and any expenditure incurred in deriv- ing that income that is allowed as a deduction are treated as derived and incurred, respectively, at a uniform daily rate throughout that part of the income year.
Deﬁned in this Act: assessable income, business, deduction, family scheme income, income, income from employment, income year, pay period Compare: 2004 No 35 s KD 2(6C) 1848 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s ME 1 MD 16 Calculation of parental tax credit abatement (1) (2) (3) When this section applies This section applies when— (a) a person is entitled under section MD 11 to a parental tax credit for a parental entitlement period; and they choose to have the credit paid in a lump sum; and the birth occurs within 56 days of the end of the tax year.
(b) (c) Amount of abatement Despite section MD 2, the amount of the person’s parental tax credit abatement for the parental entitlement period is calcu- lated using the formula— full-year abatement × 56 365 – amount used.
Deﬁnition of items in formula In the formula,— (a) (b) full-year abatement has the same meaning as the item full-year abatement in section MD 13(3)(a): amount used means an amount of family credit abate- ment under section MD 13 for an entitlement period that ends on the last day of the tax year to the extent to which the abatement would be applied under section MD 2(2)(c)(i) and (ii) in calculating a net contribution.
Deﬁned in this Act: amount, entitlement period, family credit abatement, parental entitlement period, parental tax credit, pay, tax year Compare: 2004 No 35 s KD 2B Section MD 16: added, on 1 April 2008, by section 478 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

Subpart ME—Minimum family tax credit Subpart ME heading: substituted, on 1 April 2008, by section 479 of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
ME 1 Minimum family tax credit (1) Tax credit A person who qualiﬁes under sections MC 3 to MC 6 (which relate to the qualifying criteria) is entitled to a tax credit (the 1849 Part M s ME 1 Income Tax Act 2007 Reprinted as at 1 January 2010 minimum family tax credit) for an entitlement period equal to an amount calculated using the formula in subsection (2).
Formula The formula is— (2) Deﬁnition of items in formula In the formula,— (a) (b) prescribed amount is $20,540: net family scheme income is the net family scheme in- come, calculated using the formula in section ME 3, for a relationship period containing the entitlement period, of— (i) (ii) the person; or their spouse, civil union partner, or de facto part- ner; or the person and their spouse, civil union partner, or de facto partner: (iii) (c) weekly periods is the number of periods of 1 week in the entitlement period for which the person is a fulltime earner.
Order in Council increasing amount In subsection (3)(a), the amount referred to may be increased as prescribed by the Governor-General by Order in Council under section MF 7 (Orders in Council).

Relationship with section 80KW of the Tax Administration Act 1994 This section is overridden by section 80KW of the Tax Ad- ministration Act 1994.
Deﬁned in this Act: amount, civil union partner, de facto partner, entitlement period, full-time earner, minimum family tax credit, net family scheme income, relationship period, spouse, tax credit Compare: 2004 No 35 s KD 3(2)–(5) Section ME 1 heading: substituted, on 1 April 2008, by section 480(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section ME 1(1): amended, on 1 April 2008, by section 480(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section ME 1(3)(a): amended, on 1 April 2009, by clause 3(1) of the Income Tax (Minimum Family Tax Credit) Order 2008 (SR 2008/384).

(3) (4) (5) 1850 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s ME 2 Section ME 1(3)(b): amended, on 1 April 2008, by section 480(3) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section ME 1 list of deﬁned terms family tax credit: repealed, on 1 April 2008, by section 480(4)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section ME 1 list of deﬁned terms minimum family tax credit: inserted, on 1 April 2008, by section 480(4)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
ME 2 Meaning of employment for this subpart (1) (2) (3) Meaning For the purposes of the calculation of a minimum family tax credit, employment in the deﬁnition of full-time earner, means the activity of a person that gives rise, or will give rise, to an entitlement to a PAYE income payment other than— (a) a payment of any of the kinds referred to in section RD 5(3) and (6)(b) and (c) (Salary or wages): a schedular payment that is a contract payment for a contract activity or service of a non-resident contractor: a payment made by a close company to a person who is a major shareholder of the close company: a payment made by a person to their spouse, civil union partner, or de facto partner: a payment made by a business carried on by 2 or more persons jointly, whether in partnership or otherwise, to a spouse, civil union partner, or de facto partner of 1 of the persons in business.
(b) (c) (d) (e) When subsections (3) and (4) apply Subsections (3) and (4) apply when a person— (a) (b) receives a PAYE income payment; and on the date of receipt— (i) (ii) does not undertake any employment; or performs an activity to an extent less than would give rise to an entitlement to the PAYE income payment.

Commissioner’s determination The Commissioner may treat the person as having undertaken the employment or performed the activity that would have given rise to the PAYE income payment.
1851 Part M s ME 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Considerations The Commissioner must have regard to— (a) (b) the date of receipt of the PAYE income payment; and the pay period in which the PAYE income payment oc- curs; and the circumstances giving rise to the PAYE income pay- ment; and any other matters that the Commissioner considers rele- vant.
(c) (d) Deﬁned in this Act: business, civil union partner, close company, Commis- sioner, contract activity or service, contract payment, de facto partner, employ- ment, full-time earner, minimum family tax credit, major shareholder, non-resi- dent contractor, pay, pay period, PAYE income payment, schedular payment, spouse Compare: 2004 No 35 ss KD 3(1) employment, KD 3A(10) Section ME 2(1): amended, on 1 April 2008, by section 481(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section ME 2 list of deﬁned terms family tax credit: repealed, on 1 April 2008, by section 481(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section ME 2 list of deﬁned terms full-time earner: inserted (with effect on 1 April 2008), on 6 October 2009, by section 362 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ME 2 list of deﬁned terms minimum family tax credit: inserted, on 1 April 2008, by section 481(2)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

ME 3 Meaning of net family scheme income When this section applies This section applies for the purposes of this subpart.

Formula Net family scheme income, for a person and a relationship period, means the amount calculated using the formula— adjusted income – adjusted liability + amount received – amount paid.
Deﬁnition of items in formula In the formula,— (a) adjusted income is— (i) the amount of the person’s net income under section MB 1 (Adjustments for calculation of (1) (2) (3) 1852 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s ME 3 family scheme income) for the tax year in which the relationship period falls that is attributable to the number of weeks in which the person is a full-time earner, adjusted to an annualised amount that is found by multiplying the amount by the fraction that is 52 divided by the number of weeks in the relationship period for which the person is a full-time earner; and calculated without reference to the amounts re- ferred to in section MB 1(2) and (3): (ii) (b) (c) (d) (e) [Repealed] adjusted liability is the amount that would be the per- son’s income tax liability— (i) treating the amount of adjusted income under paragraph (a) as if it were the person’s net in- come: [Repealed] (ii) amount received is the amount referred to in section MB 1(2) for the tax year: amount paid is the amount of the deduction referred to in section MB 1(3) for the tax year.
Deﬁned in this Act: amount, deduction, full-time earner, income tax liability, net income, pay, relationship period, tax credit, tax year Compare: 2004 No 35 s OB 1 net speciﬁed income Section ME 3: added, on 1 April 2008, by section 482 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section ME 3(2) formula: substituted (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 363(1) of the Taxation (International Taxation, Life Insur- ance, and Remedial Matters) Act 2009 (2009 No 34).

Section ME 3(3)(a)(i): substituted (with effect on 1 April 2008), on 6 October 2009, by section 363(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ME 3(3)(b): repealed (with effect on 1 April 2008), on 6 October 2009, by section 363(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section ME 3(3)(c)(i): amended (with effect from 1 April 2008), on 29 May 2008, by section 34(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
Section ME 3(3)(c)(ii): repealed (with effect from 1 April 2008), on 29 May 2008, by section 34(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
1853 Part M s MF 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Subpart MF—Payment of credits MF 1 Application for payment of tax credit by instalment (1) (2) (3) When this section applies This section applies when— (a) a person who is a principal caregiver expects to be en- titled, throughout a selected period, to a tax credit under section MD 1 (Abating WFF tax credit) or, as applic- able, sections MD 1 and ME 1 (Minimum family tax credit); and section MF 2 does not apply to the person; and the person wants the tax credit to be paid by instalment before the end of the tax year that contains the selected period.
(b) (c) Application The person may ask the Commissioner to pay the tax credit by instalment to them.

Meaning of selected period Selected period is a relationship period chosen by the person for the purposes of this section and sections 80KA to 80KG of the Tax Administration Act 1994.
Deﬁned in this Act: Commissioner, pay, principal caregiver, relationship period, selected period, tax credit, tax year Compare: 2004 No 35 s KD 5(1), (1A) Section MF 1(1)(a): amended, on 1 April 2008, by section 483 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MF 2 When person not entitled to payment by instalment When this section applies This section applies when— (a) a person— (i) (ii) expects that in a relationship period they will be entitled to receive an income-tested beneﬁt; or applies under section 80KP of the Tax Adminis- tration Act 1994 to the chief executive for pay- ment of a tax credit for a period after an in- come-tested beneﬁt has ended; and (b) the chief executive— (1) 1854 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MF 3 (2) (i) (ii) is authorised by section 80KN of that Act to pay an abating WFF tax credit to the person; and does not ask the Commissioner under section 80KQ of that Act to accept from the person an application for a notice of entitlement.
No entitlement The person is not entitled to apply under section MF 1 for the payment of the tax credit by instalment for the relationship period, and section 80KN applies.

Deﬁned in this Act: abating WFF tax credit, chief executive, Commissioner, income-tested beneﬁt, notice of entitlement, pay, relationship period, tax credit Compare: 2004 No 35 s KD 5(8) Section MF 2(1)(b)(i): amended, on 1 April 2008, by section 484(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 2 list of deﬁned terms abating WFF tax credit: inserted, on 1 April 2008, by section 484(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 2 list of deﬁned terms family assistance credit: repealed, on 1 April 2008, by section 484(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MF 3 Calculating amount of interim WFF tax credit (1) (2) When this section applies This section applies when the Commissioner receives an ap- plication under section MF 1 and is required under section 80KD(2) of the Tax Administration Act 1994 to determine the amount of the tax credit to which the person applying would be entitled.
Method for determining family assistance credit The Commissioner must— (a) calculate an amount (the annual amount) using the for- mula in subsection (3); and ascertain the amount (amount A) that, in schedule 31, column 2 (Annualised equivalent amount for Part M) is the equivalent of the annual amount represented in schedule 31, column 1; and calculate the WFF tax credit that the person would be entitled to for the tax year in which the calculation period falls if the family scheme income of the person for the calculation period were equal to amount A.
(b) (c) 1855 Part M s MF 4 Income Tax Act 2007 Reprinted as at 1 January 2010 Formula The formula is— (3) (4) Deﬁnition of items in formula In the formula,— (a) attributed net income is equal to such amount of the family scheme income expected to be attributable to the part of the tax year that is the part (the calculation period) for which the Commissioner determines that a tax credit is allowable to the person: days is the number of days in the calculation period.
(b) Deﬁned in this Act: amount, Commissioner, family scheme income, tax credit, tax year, WFF tax credit Compare: 2004 No 35 s KD 5(6) Section MF 3 heading: amended, on 1 April 2008, by section 485(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 3(2)(c): amended, on 1 April 2008, by section 485(2) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 3 list of deﬁned terms family assistance credit: repealed, on 1 April 2008, by section 485(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 3 list of deﬁned terms WFF tax credit: inserted, on 1 April 2008, by section 485(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MF 4 Requirements for calculating instalment of tax credit How to calculate instalment The Commissioner must calculate the amount of an instalment by way of tax credit under section MD 1 (Abating WFF tax credit) or, as applicable, sections MD 1 and ME 1 (Minimum family tax credit)— (a) as if the calculation period referred to in section MF 3 were a relationship period; and using— (i) (b) a value for family scheme income as directed by section MF 3(2)(c); and the amounts of family tax credit, in-work tax credit, child tax credit, parental tax credit, family credit abatement, and minimum family tax credit (ii) (1) 1856 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MF 4B (2) set out in sections MD 3, MD 4, MD 11, MD 12, and ME 1 (which relate to credits).
Instalment shown in complete dollars An instalment of a tax credit under section MD 1 or, as applic- able, sections MD 1 and ME 1, is to be shown in a notice of entitlement in complete dollars.
Deﬁned in this Act: amount, child tax credit, Commissioner, family credit abatement, family scheme income, family tax credit, in-work tax credit, min- imum family tax credit, notice of entitlement, parental tax credit, relationship period, tax credit Compare: 2004 No 35 s KD 5(6A), (7) Section MF 4(1): amended, on 1 April 2008, by section 486(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 4(1)(b)(ii): amended, on 1 April 2008, by section 486(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 4 list of deﬁned terms family support: repealed, on 1 April 2008, by section 486(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 4 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 486(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 4 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 486(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 4 list of deﬁned terms minimum family tax credit: inserted, on 1 April 2008, by section 486(3)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
MF 4B Calculation of instalments: 1 April 2008 to 30 September 2008 (1) (2) When this section applies This section applies for calculating the amount of an instal- ment by way of tax credit under section MD 1, or as applic- able, sections MD 1 and ME 1 for the period starting on 1 April 2008 and ﬁnishing on 30 September 2008.
Family tax credit formula: section MD 3 The instalments for the relevant tax credit are calculated us- ing, for the calculation of the family tax credit, the following formula: 1857 Part M s MF 4B Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) prescribed amount × days 365.

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (4) and (5).
Prescribed amount Prescribed amount is the sum of the following amounts: (a) for the eldest dependent child for whom the person is a principal caregiver during the entitlement period, 1 of the following, as applicable: (i) (ii) (iii) $4,264, if the child is younger than 16: $4,940, if the child is 16 or older: a weighted average of the amounts in subpara- graphs (i) and (ii) that reﬂects the proportion of the period for which those subparagraphs apply to the child, if the child turns 16 during the en- titlement period; and (b) for each dependent child for whom the person is a prin- cipal caregiver during the entitlement period, other than the eldest dependent child, 1 of the following, as applic- able: (i) (ii) (iii) (iv) $2,964, if the child is younger than 13: $3,380, if the child is 13, 14, or 15: $4,420, if the child is 16 or older: a weighted average of the amounts in subpara- graphs (i) and (ii) that reﬂects the proportion of the period for which those subparagraphs apply to the child, if the child turns 13 during the en- titlement period: a weighted average of the amounts in subpara- graphs (ii) and (iii) that reﬂects the proportion of the entitlement period for which those subpara- graphs apply to the child, if the child turns 16 during the entitlement period.
(v) Days Days is the number of days in the entitlement period.

(5) 1858 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MF 4B (6) (7) (8) When another person cares for dependent child A family tax credit must be reduced in proportion to the time in the entitlement period that a dependent child spends in the exclusive care of another person who qualiﬁes under section MC 2.
Family credit abatement formula: section MD 13 The instalments for the relevant tax credit are calculated us- ing, for the calculation of the family credit abatement, the following formula: full-year abatement × days 365.
Deﬁnition of items in formula In the formula,— (a) full-year abatement is,— (i) (ii) if the person has no spouse, civil union part- ner, or de facto partner during the entitlement period, and the person’s family scheme income for the relationship period containing the entitle- ment period is more than $35,000, 20 cents for each complete dollar of the excess; or if the person has a spouse, civil union partner, or de facto partner during the entitlement period, and the person’s family scheme income, the fam- ily scheme income of their spouse, civil union partner, or de facto partner, or the sum of those in- comes for the relationship period containing the entitlement period is more than $35,000, 20 cents for each complete dollar of the excess: (b) days is the number of days in the entitlement period excluding the days of any calendar months in which the person receives protected family tax credit as described in section MD 14.
When 56-day period includes 31 March If a person who qualiﬁes under section MC 2 (Who qualiﬁes for entitlements under family scheme?)
receives instalments of the parental tax credit in a 56-day period that includes 31 March, the formula is applied so that— (9) 1859 Part M s MF 4C Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) instalments of the parental tax credit received in the ﬁrst tax year are abated against the person’s family scheme income, the family scheme income of their spouse, civil union partner, or de facto partner, or the sum of those incomes for that tax year; and instalments of the parental tax credit received in the second tax year are abated against the person’s fam- ily scheme income, the family scheme income of their spouse, civil union partner, or de facto partner, or the sum of those incomes for that tax year.
Relationship with subject matter (10) Sections MD 14 to MD 16, with necessary modiﬁcations, apply to the calculation of the family credit abatement in subsection (7).
Deﬁned in this Act: amount, child, civil union partner, de facto partner, depend- ent child, entitlement period, family credit abatement, family scheme income, family tax credit, parental tax credit, principal caregiver, protected family tax credit, relationship period, spouse, tax year Section MF 4B: inserted (with effect from 1 April 2008), on 29 May 2008, by section 33 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
MF 4C Calculation of instalments: 1 October 2008 to 31 March 2009 When this section applies This section applies for calculating the amount of an instal- ment by way of tax credit under section MD 1, or as applicable, sections MD 1 and ME 1 for the period starting on 1 October 2008 and ﬁnishing on 31 March 2009.
Family tax credit formula: section MD 3 The instalments for the relevant tax credit are calculated us- ing, for the calculation of the family tax credit, the following formula: prescribed amount × days 365.

Deﬁnition of items in formula The items in the formula are deﬁned in subsections (4) and (5).
(1) (2) (3) 1860 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MF 4C (4) Prescribed amount Prescribed amount is the sum of the following amounts: (a) for the eldest dependent child for whom the person is a principal caregiver during the entitlement period, 1 of the following, as applicable: (i) (ii) (iii) $4,487, if the child is younger than 16: $5,198, if the child is 16 or older: a weighted average of the amounts in subpara- graphs (i) and (ii) that reﬂects the proportion of the period for which those subparagraphs apply to the child, if the child turns 16 during the en- titlement period; and (b) for each dependent child for whom the person is a prin- cipal caregiver during the entitlement period, other than the eldest dependent child, 1 of the following, as applic- able: (i) (ii) (iii) (iv) $3,119, if the child is younger than 13: $3,557, if the child is 13, 14, or 15: $4,651, if the child is 16 or older: a weighted average of the amounts in subpara- graphs (i) and (ii) that reﬂects the proportion of the period for which those subparagraphs apply to the child, if the child turns 13 during the en- titlement period: a weighted average of the amounts in subpara- graphs (ii) and (iii) that reﬂects the proportion of the entitlement period for which those subpara- graphs apply to the child, if the child turns 16 during the entitlement period.
(v) (5) (6) Days Days is the number of days in the entitlement period.

When another person cares for dependent child A family tax credit must be reduced in proportion to the time in the entitlement period that a dependent child spends in the exclusive care of another person who qualiﬁes under section MC 2.
1861 Part M s MF 4C Income Tax Act 2007 Reprinted as at 1 January 2010 Family credit abatement formula: section MD 13 The instalments for the relevant tax credit are calculated us- ing, for the calculation of the family credit abatement, the following formula: full-year abatement × days 365.
Deﬁnition of items in formula In the formula,— (a) full-year abatement is,— (i) (ii) if the person has no spouse, civil union part- ner, or de facto partner during the entitlement period, and the person’s family scheme income for the relationship period containing the entitle- ment period is more than $36,827, 20 cents for each complete dollar of the excess; or if the person has a spouse, civil union partner, or de facto partner during the entitlement period, and the person’s family scheme income, the fam- ily scheme income of their spouse, civil union partner, or de facto partner, or the sum of those in- comes for the relationship period containing the entitlement period is more than $36,827, 20 cents for each complete dollar of the excess: (b) days is the number of days in the entitlement period excluding the days of any calendar months in which the person receives protected family tax credit as described in section MD 14.
When 56-day period includes 31 March If a person who qualiﬁes under section MC 2 (Who qualiﬁes for entitlements under family scheme?)
receives instalments of the parental tax credit in a 56-day period that includes 31 March, the formula is applied so that— (a) instalments of the parental tax credit received in the ﬁrst tax year are abated against the person’s family scheme income, the family scheme income of their spouse, civil union partner, or de facto partner, or the sum of those incomes for that tax year; and (7) (8) (9) 1862 Reprinted as at 1 January 2010 (b) Income Tax Act 2007 Part M s MF 5 instalments of the parental tax credit received in the second tax year are abated against the person’s fam- ily scheme income, the family scheme income of their spouse, civil union partner, or de facto partner, or the sum of those incomes for that tax year.
Relationship with subject matter (10) Sections MD 14 to MD 16, with necessary modiﬁcations, apply to the calculation of the family credit abatement in subsection (7).
Deﬁned in this Act: amount, child, civil union partner, de facto partner, depend- ent child, entitlement period, family credit abatement, family scheme income, family tax credit, parental tax credit, principal caregiver, protected family tax credit, relationship period, spouse, tax year Section MF 4C: inserted (with effect from 1 April 2008), on 29 May 2008, by section 33 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
MF 5 Recovery of overpaid tax credit (1) (2) (3) When this section applies This section applies when the Commissioner considers that the amount of a tax credit under section MD 1 (Abating WFF tax credit) or ME 1 (Minimum family tax credit) set off or refunded to a person for a tax year is more than the proper amount.

Recovery of overpayment The Commissioner may recover the excess as if it were in- come tax payable by the person.
However, if, throughout the tax year, the person is in a relationship with a spouse, civil union partner, or de facto partner, the person and that spouse or partner are jointly and severally liable for the payment of the excess.
Shortfall penalties The person is not liable for a shortfall penalty under Part 9 of the Tax Administration Act 1994 in relation to an amount that the Commissioner may recover under this section if the amount set off or refunded is more than the proper amount because the person— (a) applied for a tax credit under section 41 of that Act before 1 April 2007; and 1863 Part M s MF 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) was eligible to be a transitional resident at the time of the application; and notiﬁed the Commissioner before 1 June 2007 that they did not wish the application to be treated under section HR 8(5) (Transitional residents) as an election under section HR 8(4).
Deﬁned in this Act: amount, civil union partner, Commissioner, de facto part- ner, income tax, notify, pay, shortfall penalty, spouse, tax credit, tax year, tran- sitional resident Compare: 2004 No 35 s KD 4(4) Section MF 5(1): amended, on 1 April 2008, by section 487 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 5(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 364(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
MF 6 Overpayment or underpayment of tax credit (1) When this section applies This section applies for the purposes of sections LA 3 and LA 4 (which relate to the treatment of a person’s total tax credits) when— (a) (b) (c) (d) a person has an entitlement to a tax credit under section MD 1 (Abating WFF tax credit) or ME 1 (Minimum family tax credit); and the person applies under section MF 1 to have the tax credit paid by instalment; and the instalments of the estimated tax credit, or the total of those instalments, differs from the tax credit, or total tax credit, to which the person is entitled under the family scheme because the instalment has, or the total instal- ments have, either been overpaid resulting in an excess or underpaid resulting in a shortfall; and the Commissioner— (i) gives the person a notice of entitlement for the tax year because an instalment of the estimated tax credit has been paid to the person during the tax year; or ﬁnds out, otherwise than by way of a notice of entitlement, that an instalment of the estimated (ii) 1864 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MF 7 tax credit has been paid to the person for the tax year.
(2) (3) Overpayment For an overpayment of the person’s entitlement, an amount equal to the excess is— (a) added to the tax payable by the person for the tax year; and recoverable by the Commissioner under section 80KLB of the Tax Administration Act 1994 as if it were tax payable by the person for the tax year.
(b) Underpayment For an underpayment of the entitlement, an amount equal to the shortfall is used to satisfy the person’s income tax liability, and any balance remaining is treated as tax paid in excess and available for use under section LA 7(2) (Remaining refundable credits: tax credits under social policy schemes).
Deﬁned in this Act: amount, Commissioner, family scheme, income tax liabil- ity, notice of entitlement, pay, tax, tax credit, tax year Section MF 6: substituted (with effect on 1 April 2008), on 6 October 2009, by section 365(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MF 6(1)(a): amended, on 1 April 2008, by section 488 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MF 7 Orders in Council (1) What may be done by Order in Council The Governor-General may, by Order in Council,— (a) increase the amounts appearing as items in the formulas for family tax credit listed in section MD 3(3) (Calcula- tion of family tax credit) and the amount of the threshold set out in MD 13(3) (Calculation of family credit abate- ment) by amounts that— (i) correspond to the movement in the quarterly all groups index number of the New Zealand Con- sumers Price Index: are rounded up to the nearest whole dollar, with- out affecting the calculation of later increases made under this paragraph: (ii) 1865 Part M s MF 7 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) (d) (e) increase the amounts appearing as items in the formula for the in-work tax credit set out in section MD 10(3) (Calculation of in-work tax credit): increase the amount appearing as an item in the formula for the parental tax credit set out in section MD 12(3) (Calculation of parental tax credit): increase the amount appearing as an item in the formula for the minimum family tax credit in section ME 1(3) (minimum family tax credit): replace schedule 31 (Annualised equivalent amount for Part M).
Order in Council under subsection (1)(a): requirements An Order in Council under subsection (1)(a),— (a) in the case of the ﬁrst Order in Council made under sub- section (1)(a), must be made when the total percentage increase in the movements in the quarterly all groups index number of the New Zealand Consumers Price In- dex measured from that applying on 1 October 2008 is 5% or more: in the case of a subsequent Order in Council under sub- section (1)(a), must be made when the total percentage increase in the movements in the quarterly all groups index number of the New Zealand Consumers Price In- dex measured from that applying on the date when the requirement to make the immediately preceding adjust- ment arose is 5% or more.
(b) Timing of Order in Council An Order in Council made under this section must be made no later than 1 December in each year and must apply from 1 April following that date.
Review of in-work tax credit and parental tax credit The Minister responsible for the Inland Revenue Depart- ment, in consultation with the Minister responsible for the department currently responsible for administering the Social Security Act 1964, must cause a review to be undertaken of the amounts of the in-work tax credit and the parental tax credit allowable under subparts MB to MF and MZ.
(2) (3) (4) 1866 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MK 1 (5) Timing of review A review undertaken under subsection (4) must occur,— (a) in the case of the ﬁrst review, not later than 30 June 2008; and in the case of subsequent reviews, not later than 30 June in the third year after each preceding review.
(b) Deﬁned in this Act: amount, family tax credit, in-work tax credit, minimum family tax credit, parental tax credit Compare: 2004 No 35 s KD 5C Section MF 7(1)(a): amended, on 1 April 2008, by section 489(1) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 7(1)(b): amended, on 1 April 2008, by section 489(2) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 7(1)(d): amended, on 1 April 2008, by section 489(3) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 7(2)(a): amended (with effect from 1 April 2008), on 29 May 2008, by section 35 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section MF 7(4) heading: amended, on 1 April 2008, by section 489(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 7(4): amended, on 1 April 2008, by section 489(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 7 list of deﬁned terms family support: repealed, on 1 April 2008, by section 489(6)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 7 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 489(6)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 7 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 489(6)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MF 7 list of deﬁned terms minimum family tax credit: inserted, on 1 April 2008, by section 489(6)(a) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Subpart MK—Tax credits for KiwiSaver schemes and complying superannuation funds MK 1 Tax credits for superannuation contributions (1) Tax credits for members paid to fund providers A fund provider of a person’s KiwiSaver scheme or a comply- ing superannuation fund has a tax credit equal to an amount 1867 Part M s MK 2 Income Tax Act 2007 Reprinted as at 1 January 2010 calculated under section MK 4 for a member credit contribu- tion to the scheme or fund.
Section MK 2 imposes some eligi- bility requirements for the year described in subsection (3) in relation to the person.

(2) (3) (4) Tax credits for employers [Repealed] [Repealed] Calculations: fund providers A tax credit referred to in subsection (1) is calculated for a year that begins on 1 July and ends on 30 June.
Calculations: employers [Repealed] [Repealed] Deﬁned in this Act: amount, complying superannuation fund, employee, employer, employer contribution, fund provider, KiwiSaver scheme, member credit contribution, pay, tax credit, tax year Compare: 2004 No 35 ss KJ 1, KJ 6, OB 1 member credit year Section MK 1: substituted, on 1 April 2008, by section 125 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
Section MK 1(1): amended (with effect on 1 April 2008), on 6 October 2009, by section 366 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section MK 1(2) heading: repealed, on 1 April 2009, pursuant to section 53 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

Section MK 1(2): repealed, on 1 April 2009, by section 53 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section MK 1(4) heading: repealed, on 1 April 2009, pursuant to section 53 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

Section MK 1(4): repealed, on 1 April 2009, by section 53 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

Tax credits for fund providers Heading: inserted, on 1 April 2008, by section 126 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
MK 2 Eligibility requirements Requirements for person For the purposes of section MK 1(1), the requirements for the person for the year described in section MK 1(3) are the fol- lowing: (1) 1868 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MK 2 (a) (b) (c) (d) they must be 18 years or older; and they must have a creditable membership of a complying superannuation fund or a KiwiSaver scheme; and they must not be entitled under schedule 1, clause 4(3) of the KiwiSaver Act 2006 or an equivalent provision to withdraw an amount from the scheme or fund; and they must reside mainly in New Zealand, or otherwise they must— (i) be an employee of the State services under the State Sector Act 1988 serving outside New Zealand; or (ii) work overseas as a volunteer or for token pay- ment for a charitable organisation named in regu- lations made under the Student Loan Scheme Act 1992 and the work meets 1 or more of the require- ments in sections 38AEA(a)(i) to (iii) of that Act.
Evidence For the purposes of subsection (1)(d)(i) and (ii), the person must give the fund provider written evidence that they meet the requirements, and of the period in which they meet the requirements.
Deﬁned in this Act: amount, complying superannuation fund, creditable mem- bership, employee, KiwiSaver scheme, New Zealand, resident in New Zealand, tax credit Compare: 2004 No 35 s KJ 2 Section MK 2(1) heading: substituted, on 1 April 2008, by section 127(1) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section MK 2(1): amended (with effect on 1 April 2008), on 6 October 2009, by section 367 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section MK 2(1): amended, on 1 April 2008, by section 127(1) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section MK 2(1)(b): substituted, on 1 April 2008, by section 127(2) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section MK 2 creditable membership: inserted, on 1 April 2008, by section 127(3) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
(2) 1869 Part M s MK 3 Income Tax Act 2007 Reprinted as at 1 January 2010 MK 3 Payment of tax credits When this section applies This section applies when a member credit contribution is made to a KiwiSaver scheme or a complying superannuation fund.

Payment The Commissioner must pay a tax credit to the trustees of the scheme or fund (the fund provider) to which the person has contributed.

The amount of the tax credit is calculated under section MK 4.

Subsection (5) overrides this subsection.


Full amount paid The Commissioner must pay the full amount of the tax credit by direct credit to the fund provider without subtracting any amount that the person or fund provider may be obliged to pay to the Commissioner.

Subsection (5) overrides this subsection.


Payment The Commissioner must pay the amount of the tax credit to the fund provider within 30 working days of the provider ﬁling a claim form under section 68C(3) or (4) of the Tax Administra- tion Act 1994.
Exception: payment to person or another provider Despite subsections (2) and (3), the Commissioner may pay the amount of the tax credit as follows: (a) to the person, if it would be impossible or impractical to pay it to the person’s fund provider because either the person has no fund provider, or because the person has died or has suffered a serious illness as deﬁned in schedule 1, clause 12(3) of the KiwiSaver Act 2006; or to a fund provider (provider B) other than the fund provider referred to in subsections (2) and (3), if the fund provider asks for the payment to be made to provider B because the person is transferring or has transferred to provider B.
(b) Deﬁned in this Act: amount, Commissioner, complying superannuation fund, employer contribution, employer’s superannuation contribution, fund provider, KiwiSaver scheme, member credit contribution, pay, tax credit, trustee Compare: 2004 No 35 ss KJ 1, KJ 4, OB 1 member credit contributions Section MK 3(1) heading: substituted, on 1 April 2008, by section 128(1) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
(1) (2) (3) (4) (5) 1870 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MK 4 Section MK 3(1): substituted, on 1 April 2008, by section 128(1) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section MK 3(2): amended, on 1 April 2008, by section 128(2) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section MK 3(3): amended, on 1 April 2008, by section 128(3) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
Section MK 3(4) heading: substituted, on 1 April 2008, by section 128(4) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section MK 3(4): substituted, on 1 April 2008, by section 128(4) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section MK 3(5) heading: added, on 1 April 2008, by section 128(4) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section MK 3(5): added, on 1 April 2008, by section 128(4) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
Section MK 3 list of deﬁned terms employer contribution: inserted, on 1 April 2008, by section 128(5)(a) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section MK 3 list of deﬁned terms member credit contribution: inserted, on 1 April 2008, by section 128(5)(a) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Section MK 3 list of deﬁned terms superannuation contribution: repealed, on 1 April 2008, by section 128(5)(b) of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
MK 4 Amount of tax credit (1) (2) (3) What this section does This section sets out how to calculate the amount of a tax credit paid to a fund provider under section MK 3(2) for a year de- scribed in section MK 1(3).

Amount of credit for year The amount of the tax credit is an amount equal to a person’s total member credit contributions for the year for all of their complying superannuation funds and KiwiSaver schemes up to a maximum amount of $1042.86.
Part-year equivalents: amount of tax credit Despite subsection (2), if the person meets the requirements of section MK 2 for only part of the year, the amount of the tax credit is,— (a) for a person whose member credit contributions for the year are equal to or less than the part-year maximum amount calculated under subsection (4), an amount equal to their total contributions for the year; or 1871 Part M s MK 5 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) for a person whose member credit contributions for the year are greater than the part-year maximum amount calculated under subsection (4), the part-year maximum amount.
(4) Part-year equivalents: maximum amount The part-year maximum amount referred to in subsection (3) is calculated using the formula— $1042.86 × days 365.

(5) (6) Deﬁnition of item in formula In the formula, days is the number of days in the year in which the person meets the requirements of section MK 2.
Parts of years In subsection (3), a part of the year may include 1 or more periods of the year in which the person meets the relevant re- quirements and, if there are several periods, for the purposes of the item days in the formula, the days in those periods are added together.
Deﬁned in this Act: amount, employee, employer contribution, ﬁrst payment period, fund provider, member credit contribution, salary or wages, second pay- ment period, tax credit Compare: 2004 No 35 ss KJ 3, OB 1 member credit year Section MK 4: substituted, on 1 April 2008, by section 129 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).
MK 5 Crown contributions for members A tax credit paid to a person’s fund provider under section MK 3 is treated as a Crown contribution for the person, and the KiwiSaver scheme rules and complying fund rules, as applic- able, apply to the amount.
Deﬁned in this Act: amount, complying fund rules, fund provider, KiwiSaver scheme, pay, tax credit Compare: 2004 No 35 s KJ 5(2) MK 6 Credit given by fund providers A fund provider who receives a tax credit under section MK 3 must credit the relevant person with the amount which must 1872 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MK 8 vest in the person immediately after it is paid to the fund provider.
The provider must use the contribution allocation for a member to credit the amount of the tax credit on a pro rata basis across the investment products to which the person has subscribed or been allocated as a member of a KiwiSaver scheme or complying superannuation fund.
Deﬁned in this Act: amount, complying superannuation fund, fund provider, KiwiSaver scheme, pay, tax credit Compare: 2004 No 35 s KJ 5(3), (4) Section MK 6: amended, on 1 April 2008, by section 130 of the Taxation (Kiwi- Saver) Act 2007 (2007 No 110).

MK 7 Amounts paid in excess Despite section MK 6, a fund provider is treated as having the amount of a tax credit paid under section MK 3 for the pur- poses of recovering any amount paid in excess of that properly payable.
For the purposes of this section, the fund provider may subtract an amount from a person’s account to pay the Commissioner the excess amount.
Deﬁned in this Act: amount, Commissioner, fund provider, pay, tax credit Compare: 2004 No 35 s KJ 5(1), (5) MK 8 Treatment of tax credits on permanent emigration (1) (2) When this section applies This section applies in the case of a permanent emigration from New Zealand when a person for whom a tax credit has been paid asks their fund provider after their emigration to withdraw or transfer from their KiwiSaver scheme or com- plying superannuation fund under schedule 1, clause 14 of the KiwiSaver Act 2006 or an equivalent provision.
Payment to Commissioner The fund provider must pay to the Commissioner as soon as practicable the lesser of— (a) the amount of the tax credit paid for the person and held by the provider: the amount of member’s accumulation, as deﬁned in the KiwiSaver Act 2006 for the person for a KiwiSaver scheme: (b) 1873 Part M s MK 9 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (c) the amount of employee’s superannuation accumulation for the person for a complying superannuation fund.
Recovery If the fund provider does not pay the amount under subsection (2) as soon as practicable, they are treated as having an amount of tax credit paid in excess of that properly payable.
Deﬁned in this Act: amount, Commissioner, complying superannuation fund, employee’s superannuation accumulation, fund provider, KiwiSaver scheme, New Zealand, pay, tax credit Compare: 2004 No 35 ss KJ 3, OB 1 member credit year Section MK 8(2)(a): amended, on 1 April 2008, by section 131 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

Tax credits for employers [Repealed] Heading: repealed, on 1 April 2009, by section 54 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
MK 9 Eligibility requirements [Repealed] Section MK 9: repealed, on 1 April 2009, by section 54 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

MK 10 Amount of credit [Repealed] Section MK 10: repealed, on 1 April 2009, by section 54 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

MK 11 When tax credits arise [Repealed] Section MK 11: repealed, on 1 April 2009, by section 54 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
MK 12 Using tax credits [Repealed] Section MK 12: repealed, on 1 April 2009, by section 54 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

1874 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MK 16 MK 13 When short payment and unpaid compulsory employer contributions found after tax credit used [Repealed] Section MK 13: repealed, on 1 April 2009, by section 54 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
Section MK 13(1)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 368(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

MK 14 Employees opting out [Repealed] Section MK 14: repealed, on 1 April 2009, by section 54 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
MK 15 Groups of persons (b) (c) For the purposes of this subpart, a group of persons described in 1 of the following paragraphs is treated as 1 employer: (a) 2 or more companies, if the companies are a group of companies; and all partners in a partnership; and all persons in whom property has become vested, or to whom the control of property has passed in the case of an estate of a deceased person, or a trust, or a com- pany in liquidation, or an assigned estate, or other case in which property is vested or controlled in a ﬁduciary capacity.
Deﬁned in this Act: company, employer, group of companies, group of persons Compare: 2004 No 35 s KJ 12 Section MK 15: added, on 1 April 2008, by section 132 of the Taxation (Kiwi- Saver) Act 2007 (2007 No 110).

MK 16 Private domestic workers For the purposes of this subpart, a private domestic worker who is an employer under paragraph (c) of the deﬁnition of employer in section 4 of the KiwiSaver Act 2006 is treated as paying salary or wages to themselves in the capacity of em- ployee.
Deﬁned in this Act: employee, private domestic worker, salary or wages Compare: 2004 No 35 s KJ 6(4) 1875 Part M s ML 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Section MK 16: added, on 1 April 2008, by section 132 of the Taxation (Kiwi- Saver) Act 2007 (2007 No 110).

Subpart ML—Tax credits for redundancy payments Subpart ML: inserted, on 1 April 2008, by section 490 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 110).
ML 1 What this subpart does Redundancy payments This subpart provides a tax credit for a person who derives a redundancy payment for loss of employment.
Exclusions Despite subsection (1), no tax credit arises for a redundancy payment— (a) related to— (i) (ii) retirement from employment: loss of seasonal employment arising from the normal seasonal work cycle: a contract of employment for a ﬁxed term or for the duration of a project: employment for a period following notice of ter- mination of employment: to a director of a company by the company or a person associated with the company: to a person by a person associated with them: by a person to an employee who has been paid a redundancy payment by a person associated with the person.
(iii) (iv) (ii) (iii) (b) paid— (i) Deﬁned in this Act: 1988 version provisions, associated person, company, dir- ector, employee, employment, pay, tax credit Compare: 2004 No 35 s KC 6(1), (3) Section ML 1: inserted, on 1 April 2008, by section 490 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 110).
Section ML 1(2)(b)(i): substituted (with effect on 1 April 2008), on 6 October 2009, by section 369 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

(1) (2) 1876 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s ML 3 Section ML 1(2)(b)(ii): substituted (with effect on 1 April 2008), on 6 October 2009, by section 369 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ML 1(2)(b)(iii): substituted (with effect on 1 April 2008), on 6 October 2009, by section 369 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

ML 2 Tax credit for redundancy payments (1) Tax credit A person who derives a redundancy payment has a tax credit of an amount equal to 6 cents for every complete dollar of total redundancy payments derived by them.
It does not matter whether— (a) a redundancy payment is paid in a lump sum or by in- stalment: the total redundancy payments relate to 1 or more occa- sions of redundancy of the person.

(b) (2) Maximum amount Despite subsection (1), the maximum credit that the person has for each occasion of redundancy is $3,600.
Deﬁned in this Act: amount, redundancy payment, tax credit Section ML 2: substituted (with effect on 1 April 2008), on 6 October 2009, by section 370 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section ML 2: inserted, on 1 April 2008, by section 490 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 110).
ML 3 Payment by Commissioner The person referred to in section ML 2 must apply under sec- tion 41B of the Tax Administration Act 1994 to the Commis- sioner for payment of the tax credit.

Deﬁned in this Act: Commissioner, pay, tax credit Compare: 2004 No 35 s KC 6(2) Section ML 3: inserted, on 1 April 2008, by section 490 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 110).
1877 Part M s MZ 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Subpart MZ—Terminating provisions MZ 1 Entitlement to child tax credit (1) (2) (3) When this section applies This section applies when— (a) a person is claiming or receiving a child tax credit for a child for an entitlement period ending on 31 March 2006; and the person is not entitled to an in-work tax credit under section MD 4 (Entitlement to in-work tax credit).
(b) Entitlement If the person maintains continuously their entitlement after 31 March 2006, they remain entitled to receive the child tax credit for entitlement periods after that date.

When another person entitled to credit If 2 persons are entitled to an in-work tax credit or a child tax credit for a child for an entitlement period, the amount to which each is entitled is not affected by the entitlement of the other person.
Deﬁned in this Act: amount, child, child tax credit, entitlement period, in-work tax credit Compare: 2004 No 35 ss KD 2AA(3A), KD 2AAAB Section MZ 1(1)(b): amended, on 1 April 2008, by section 491(1) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MZ 1(3): amended, on 1 April 2008, by section 491(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MZ 1 list of deﬁned terms in-work payment: repealed, on 1 April 2008, by section 491(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section MZ 1 list of deﬁned terms in-work tax credit: inserted, on 1 April 2008, by section 491(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
MZ 2 Calculation of child tax credit Entitlement A person who meets the requirements of section MZ 1 is en- titled to a child tax credit calculated using the formula in sub- section (2).
Formula The formula is— (1) (2) 1878 Reprinted as at 1 January 2010 Income Tax Act 2007 Part M s MZ 3 (3) Deﬁnition of items in formula In the formula,— (a) (b) dependent children is the number of dependent chil- dren for whom the person is a principal caregiver during the entitlement period: days in entitlement period is the number of days in the entitlement period for which the person and their spouse, civil union partner, or de facto partner do not receive a social assistance payment and do not have a suspended entitlement to an income-tested beneﬁt.
Deﬁned in this Act: amount, child tax credit, civil union partner, de facto part- ner, dependent child, entitlement period, income-tested beneﬁt, principal care- giver, social assistance payment, spouse Compare: 2004 No 35 s KD 2(4) MZ 3 Exclusions from determination of family scheme income (1) (2) (3) When this section applies This section applies for the purposes of determining under sec- tion MB 1 (Adjustments for calculation of family scheme in- come) the entitlement and tax credit of a person under the fam- ily scheme.
Refunds of main deposit An amount of main deposit made in relation to the 2002–03 or earlier income year that is refunded to the person in the 2003–04 or later income year under any of sections EH 10, EH 13, EH 15, EH 17, and EH 23 (which relate to income equalisation accounts) is not included in family scheme in- come.
Refunds of adverse event deposit An amount of adverse event deposit made under section EH 39 (Adverse event income equalisation account) in relation to the 2002–03 or earlier income year that is refunded to the person in the 2003–04 or later income year under any of sections EH 45, EH 47, and EH 53 (which relate to refunds on application) is not included in family scheme income.
1879 Part O s OA 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Treatment of interest The amount of a refund under subsections (2) and (3) does not include an amount of interest payable under section EH 6 or EH 40 (which relate to interest on deposits), as applicable.
Deﬁned in this Act: adverse event deposit, amount, family scheme, family scheme income, income year, interest, main deposit, tax credit Compare: 2004 No 35 s KD 1(1)(e)(i), (vi) Section MZ 3: added (with effect on 1 April 2008), on 6 October 2009, by section 371(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Part O Memorandum accounts Subpart OA—General provisions Introductory provisions OA 1 What this Part does This Part provides some rules of general application for recording amounts as credits and debits to a memorandum account.
Deﬁned in this Act: memorandum account OA 2 Memorandum accounts Types of account in this Part The following accounts are dealt with in this Part (a) (b) an imputation credit account, seesubparts OB and OP: a foreign dividend payment (FDP) account, seesubparts OC and OP: a conduit tax relief (CTR) account, seesubparts OD and OP: a branch equivalent tax account, seesubparts OE and OP: an available seesubpart OF: a policyholder credit account, seesubparts OJ and OP: a Maori authority credit account, seesubpart OK. subscribed capital account, (ASC) (c) (d) (e) (f) (g) (1) 1880 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OA 3 (2) (3) (4) (5) Role of accounts A memorandum account is an account listed in subsection (1) that provides a record of the credits and debits arising in the account.
Tax year A memorandum account is maintained for a tax year unless a provision in this Part expressly states otherwise.

Tables The credits and debits that arise in a memorandum account are listed in tables in each of the subparts.

The tables— (a) (b) (c) state the credits and the debits; and provide the credit dates and the debit dates; and refer to the section that fully deﬁnes the credits and debits, and their credit dates and debit dates.
Determination The Commissioner may issue a determination under section 104B of the Tax Administration Act 1994 adjusting the amount of a credit or debit, or a credit date or debit date recorded in a memorandum account if the Commissioner considers the amount or date is not correct.

The determination may be re- viewed in challenge proceedings under Part 8A of that Act.
Deﬁned in this Act: ASC account, branch equivalent tax account, Commis- sioner, CTR account, FDP account, imputation credit account, Maori authority credit account, memorandum account, policyholder credit account, tax year Compare: 2004 No 35 ss ME 1(1), ME 3(1), ME 10(1), (1A)–(1C), ME 15, ME 17(1), ME 20, ME 21(1), ME 22(1), ME 25, ME 26(2), ME 40, MF 1(1), MF 3(1), MF 6, MF 7(1), MF 11(1), MF 12(1), MG 2(1), MG 3(1), MG 12, MG 13(1), MG 14(1), MG 15(1), MI 2(1), (4), MI 3(1), MI 14, MI 17(1), MI 18(1), MJ 1(1), MJ 3(1), MJ 8, MK 1(1), MK 3(1), MK 9 OA 3 General rules for maintaining memorandum accounts (1) (2) What this section does This section sets out the rules that apply in relation to a memo- randum account to a person who— (a) (b) may choose to maintain an account.
is required to maintain a memorandum account; or Record A person who maintains a memorandum account must record all credits and all debits that arise in the account as at their 1881 Part O s OA 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) credit date or debit date.

The credits and debits are listed in provisions in the relevant subpart for each type of memoran- dum account.
Credit balances The credit balance recorded in a memorandum account during a tax year or income year, as applicable, is the excess of credits over debits.

Debit balances The debit balance recorded in a memorandum account during a tax year or income year, as applicable, is the excess of debits over credits.
Deﬁned in this Act: amount, income year, memorandum account, tax year Compare: 2004 No 35 ss ME 2, ME 3(1), ME 16, ME 17(1), ME 22(1), ME 26, MF 2, MF 3(1), MF 8, MF 12(1), MG 1, MG 3(1), MG 14(1), MG 15(1), MI 1, MI 3(1), MI 17(1), MI 18(1), MJ 2, MJ 3(1), MK 2, MK 3(1) OA 4 Certain credits and debits arising only in group accounts Certain credits or debits of a consolidated group may arise only in the memorandum account of the consolidated group and not in the memorandum account of a group company.
Memoran- dum accounts of consolidated groups are dealt with in subpart OP (Memorandum accounts of consolidated groups).

Deﬁned in this Act: company, consolidated group, memorandum account Compare: 2004 No 35 ss ME 13, ME 28(4), MF 9, MF 11(3), MG 16, MI 19 OA 5 Credits Credits and debits What this section does This section deﬁnes the credits that arise under this Part in a memorandum account.
Imputation credits A credit is an imputation credit if it is an amount— (a) set out in any of sections OA 7, OB 4 to OB 29, and OP 7 to OP 27: described in a row of table O1: imputation credits or imputation credits of consolidated imput- table O19: ation groups.
(b) (1) (2) 1882 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OA 5 (3) (4) (5) (6) (7) FDP credits A credit is an FDP credit if it is an amount— (a) set out in any of sections OA 7, OC 6 to OC 12, and OP 56 to OP 63: described in a row of table O3: FDP credits or table O21: FDP credits of consolidated FDP groups.
CTR credits A credit is a CTR credit if it is an amount— (a) set out in any of sections OA 7, OD 5 to OD 9, and OP 81 to OP 86: described in a row of table O5: CTR credits or table O23: CTR credits of consolidated groups.
Branch equivalent tax credits A credit is a branch equivalent tax credit if it is an amount,— tax account (BETA) com- (a) for a branch equivalent pany,— (i) (ii) set out in any of sections OA 7 and OE 6 to OE 11: described in a row of table O7: branch equivalent tax credits: for a BETA person,— (i) (ii) set out in section OA 7 or OE 19: described in a row of table O9: person’s branch equivalent tax credits: for a consolidated BETA group,— (i) set out in any of sections OA 7 and OP 100 to OP 104: described in a row of table O25: branch equiva- lent tax credits of consolidated BETA groups.
(ii) (b) (b) (b) (c) ASC credits A credit is an ASC credit if it is an amount— set out in section OA 7 or OF 4: (a) described in a row of table O11: ASC credits.
(b) Policyholder credits A credit is a policyholder credit if it is an amount,— (a) for a policyholder credit account (PCA) company,— (i) set out in any of sections OA 7 and OJ 3 to OJ 7: 1883 Part O s OA 6 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) (ii) described in a row of table O13: policyholder credits: for a PCA person,— (i) set out in any of sections OA 7, OJ 14, and OJ 15: described in a row of table O15: person’s policy- holder credits: (ii) for a consolidated group with a policyholder credit ac- count,— (i) set out in any of sections OA 7 and OP 110 to OP 114: described in a row of table O27: policyholder credits of consolidated groups.
(ii) (8) Maori authority credits A credit is a Maori authority credit if it is an amount— set out in any of sections OA 7 and OK 2 to OK 9: (a) described in a row of table O17: Maori authority credits.
(b) Deﬁned in this Act: amount, ASC credit, BETA company, BETA person, branch equivalent tax credit, CTR credit, consolidated BETA group, consoli- dated FDP group, consolidated group, consolidated imputation group, FDP credit, imputation credit, Maori authority credit, memorandum account, PCA company, PCA person, policyholder credit OA 6 Debits What this section does This section deﬁnes the debits that arise under this Part in a memorandum account.
Imputation debits A debit is an imputation debit if it is an amount— (a) set out in any of sections OA 7, OB 30 to OB 59, OP 28 to OP 50, and OZ 3: described in a row of table O2: table O20: ation groups.
imputation debits or imputation debits of consolidated imput- (b) FDP debits A debit is an FDP debit if it is an amount— (a) set out in any of sections OA 7, OC 13 to OC 26, and OP 64 to OP 77: (1) (2) (3) 1884 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OA 6 (b) described in a row of table O4: FDP debits or table O22: FDP debits of consolidated FDP groups.
(4) (5) (6) (7) CTR debits A debit is a CTR debit if it is an amount— (a) set out in any of sections OA 7, OD 10 to OD 19, and OP 87 to OP 94: described in a row of table O6: CTR debits or table O24: CTR debits of consolidated groups.
(b) Branch equivalent tax debits A debit is a branch equivalent tax debit if it is an amount,— (a) for a BETA company,— (i) (ii) set out in any of sections OA 7 and OE 12 to OE 16: described in a row of table O8: branch equivalent tax debits: for a BETA person,— (i) set out in any of sections OA 7 and OE 20 to OE 22: described in a row of table O10: person’s branch equivalent tax debits: for a consolidated BETA group,— (i) set out in any of sections OA 7 and OP 105 to OP 108: described in a row of table O26: branch equiva- lent tax debits of consolidated BETA groups.
(ii) (ii) (b) (c) ASC debits A debit is an ASC debit if it is an amount— set out in section OA 7 or OF 5: (a) described in a row of table O12: ASC debits.
(b) Policyholder debits A debit is a policyholder debit if it is an amount,— (a) for a PCA company,— (i) (ii) set out in any of sections OA 7 and OJ 8 to OJ 11: described in a row of table O14: policyholder debits: for a PCA person,— (i) set out in any of sections OA 7 and OJ 16 to OJ 18: (b) 1885 Part O s OA 7 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) described in a row of table O16: person’s policy- holder debits: (c) for a consolidated group with a policyholder credit ac- count,— (i) set out in any of sections OA 7, OP 115, and OP 116: described in a row of table O28: policyholder debits of consolidated groups.
(ii) (8) Maori authority debits A debit is a Maori authority debit if it is an amount— (a) set out in any of sections OA 7 and OK 10 to OK 18: described in a row of table O18: Maori authority debits.
(b) Deﬁned in this Act: amount, ASC debit, BETA company, BETA person, branch equivalent tax debit, CTR debit, consolidated BETA group, consolidated FDP group, consolidated group, consolidated imputation group, FDP debit, imput- ation debit, Maori authority debit, memorandum account, PCA company, PCA person, policyholder debit OA 7 Opening balances of memorandum accounts Opening balances Balances carried forward The opening balance of a memorandum account at the start of a tax year or income year, as applicable, is the closing balance of the account in the previous tax year or income year, as ap- plicable.
(b) (c) (d) Credit date The credit date or debit date for an opening balance is,— (a) for an imputation credit account, the ﬁrst day of the tax year: for an FDP account, the ﬁrst day of the tax year: for CTR account, the ﬁrst day of the tax year: for branch equivalent tax account— (i) of a BETA company, the ﬁrst day of the tax year; or of a BETA person, the ﬁrst day of the income year; or of a consolidated BETA group, the ﬁrst day of the tax year: (ii) (iii) (e) for an ASC account, the ﬁrst day of the tax year: (1) (2) 1886 Reprinted as at 1 January 2010 (f) Income Tax Act 2007 Part O s OA 7 for a policyholder credit account— (i) of a PCA company, the ﬁrst day of the tax year; or of a PCA person, the ﬁrst day of the income year; or of a consolidated group, the ﬁrst day of the tax year: (ii) (iii) (3) (g) for a Maori authority credit account, the ﬁrst day of the tax year.
First year If a consolidated group, company, or person starts a memo- randum account during a tax year, no credit for an opening balance arises in the account.
But this subsection does not apply— (a) when the companies of 2 or more consolidated imput- ation groups choose to combine to form, or to join, an imputation group, for which seesection OP 3(2) (Changes in consolidated imputation groups): when the companies that are part of an imputation group choose to convert their status to that of a consolidated group that is a consolidated imputation group, for which seesection OP 3(3): to a resident imputation subgroup associated with a trans-Tasman imputation group, for which seesection OP 4 (Resident imputation subgroups).
(b) (c) Deﬁned in this Act: ASC account, BETA company, BETA person, branch equivalent tax account, company, CTR account, consolidated BETA account, consolidated group, consolidated imputation group, FDP account, imputation credit account, imputation group, income year, Maori authority credit account, memorandum account, PCA company, PCA person, policyholder credit ac- count, resident imputation subgroup, tax year, trans-Tasman imputation group Compare: 2004 No 35 ss ME 3(2), ME 10(1A)–(1C), (2), ME 17(2), ME 22(2), ME 26(1), MF 3(2), MF 8(1), MF 12(2), MG 3(2), MG 13(3), MI 3(2), MI 15, MJ 3(2), MK 3(2) 1887 Part O s OA 8 Income Tax Act 2007 Reprinted as at 1 January 2010 Shareholder continuity requirements OA 8 Shareholder continuity requirements for memorandum accounts (1) (2) When this section applies This section applies when a company or a consolidated group maintains a memorandum account.
Shareholder continuity requirement An amount that is a credit in the account may be carried for- ward from a credit date to a later time only if the company or consolidated group that has the credit maintains a 66% con- tinuity of shareholding under subsection (7) from the credit date to the later time.

Subsections (3B) to (5) override this subsection.

(3) Continuity A credit is treated as continuing to exist to the extent to which it is not reduced by an earlier or later debit arising in the account.
Exclusions: qualifying companies (3B) Subsection (2) does not apply to a qualifying company.

But, if section HA 11(1) (When requirements no longer met) applies to the company,— (a) an adjustment must be made under section HA 18 (Treatment of dividends when qualifying company status ends) to the company’s imputation credit account and FDP account, as applicable; and the shareholder continuity requirements apply to the company from the day on which the status as a quali- fying company ends.
(b) Exclusion: ASC accounts Subsection (2) does not apply to a person who maintains an ASC account.

Modiﬁcation: CTR accounts The general rule in subsection (2) is modiﬁed by section OD 16 (CTRA increase in resident shareholding) for CTR accounts.
When continuity lost For a memorandum account and for a company or consoli- dated group that maintains the account when the continuity of shareholding required by subsection (7) is lost, a debit arises (4) (5) (6) 1888 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OA 8 under the relevant section in each subpart only to the extent to which an unused amount of credit remains in the memoran- dum account.
The relevant sections are— (a) section OB 41 (ICA debit for loss of shareholder con- tinuity): section OC 24 (FDPA debit for loss of shareholder con- tinuity): section OE 15 (BETA debit for loss of shareholder con- tinuity): section OK 15 (MACA debit for loss of shareholder continuity): section OP 42 (Consolidated ICA debit for loss of shareholder continuity): section OP 73 (Consolidated FDPA debit for loss of shareholder continuity): section OP 108 (Consolidated BETA debit for loss of shareholder continuity).
(b) (c) (d) (e) (f) (g) (7) (8) Shareholder continuity requirement The shareholder continuity requirement is that, while some or all of the credit still exists, a group of persons must continue to hold— (a) aggregate minimum voting interests in a company or consolidated group of at least 66%; and if a market value circumstance exists for a company or, in the case of a consolidated group, a group company, aggregate minimum market value interests in the com- pany or group of at least 66%.
(b) Modiﬁcations The following rules apply for the purposes of subsection (7) (a) the minimum interest referred to in subsection (7)(a) or (b) of a person must be counted if their interests change after the credit arises; and a credit retains its separate character and is not treated as part of a credit referred to in section OA 7 in a later tax year; and the amount by which a credit is reduced by an earlier or later debit is found by— (i) treating debits as reducing credits in the order in which credits arise; and (b) (c) 1889 Part O s OA 9 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) (iii) counting an amount of a debit only once in the reduction of some or all of a credit; and applying any relevant terminating modiﬁcations set out in section OZ 4 (Terminating modiﬁca- tions to debits for loss of shareholder continuity) for a credit arising before 1 April 1992.
Deﬁned in this Act: amount, ASC account, branch equivalent tax account, com- pany, CTR account, consolidated group, FDP account, group of persons, imput- ation credit account, Maori authority credit account, market value circumstance, market value interest, memorandum account, minimum market value interest, minimum voting interest, shareholder, tax year, voting interest Compare: 2004 No 35 ss ME 5(3), ME 12(1)(h), ME 13(2), (4), MF 4(5), MF 8(4), MG 15(1), MI 5(3)–(7), MI 18(1)(e), (3), (4), MK 5(3), (4) Section OA 8(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 376(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OA 8(3B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 376(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OA 8(3B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 376(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OA 8(4) heading: substituted (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 376(3) of the Taxation (International Taxation, Life Insur- ance, and Remedial Matters) Act 2009 (2009 No 34).

Section OA 8(4): substituted (with effect on 1 April 2008), on 6 October 2009, by section 376(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OA 8 list of deﬁned terms policyholder credit account: repealed (with effect on 1 April 2008), on 6 October 2009, by section 376(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Treatment of credits and debits on resident’s restricted amalgamation General provision OA 9 General treatment of credits and debits on resident’s restricted amalgamation When this section applies This section applies— (a) on a resident’s restricted amalgamation, in relation to an amalgamated company and a memorandum account, (1) 1890 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OA 9 if an amalgamating company ends its existence on the amalgamation and, at the time of the amalgamation, the amalgamating company maintains 1 or more memoran- dum accounts of the type referred to in sections OA 2(1)(a) to (d), and (f); and for the purposes of determining whether a credit or debit arises in the same type of account of the amalgamated company.
(b) Treatment of pre-amalgamation credits and debits A credit or debit recorded in the memorandum account of the amalgamating company before the date of the amalgamation is treated as if it were recorded in the same type of account of the amalgamated company on the date it was recorded in the amalgamating company’s account with effect from the time of the amalgamation.
Treatment of pre-amalgamation period For the purposes of section OA 8(7)(b) and (8), in determining at a time after the amalgamation whether continuity of share- holding exists for the credit or debit in the memorandum ac- count, the amalgamated company is treated for all times before the amalgamation as if— (a) (b) it did not separately exist; and it were instead the amalgamating company, with the same shareholders and option holders.
Avoidance provisions For the purposes of determining the credits and debits in the memorandum account of an amalgamating company, sections GB 34, GB 40, and GB 41 (which relate to arrangements to defeat the application of certain provisions) apply, modiﬁed as necessary.
Deﬁned in this Act: amalgamated company, amalgamating company, consoli- dated group, memorandum account, resident’s restricted amalgamation, share- holder Compare: 2004 No 35 ss ME 29(1)(a), MF 16(1)(a), MG 17(1)(a), MI 13 (2) (3) (4) 1891 Part O s OA 10 Income Tax Act 2007 Reprinted as at 1 January 2010 When companies amalgamate OA 10 When credits or debits due to amalgamating company but not recorded (1) (2) (3) When this section applies This section applies on a resident’s restricted amalgamation if, at the time of the amalgamation, an amalgamating company maintains— (a) (b) (c) (d) (e) an imputation credit account: an FDP account: a CTR account: a branch equivalent tax account: a policyholder credit account.
Credits and debits due A credit or a debit due to the amalgamating company but not recorded in its memorandum account before the date of amal- gamation is recorded in the same type of memorandum ac- count of the amalgamated company.

Subsections (3) and (4) override this subsection.
Exclusion: shareholder continuity rules Subsection (2) does not apply to— (a) a debit for loss of shareholder continuity in an imput- ation credit account arising under section OB 41 (ICA debit for loss of shareholder continuity) and described in table O2: imputation debits, row 14 (debit for loss of shareholder continuity): a debit for an increase in resident shareholding in a CTR account arising under section OD 16 (CTRA increase in resident shareholding) and described in table O6: CTR debits, row 8 (increase in resident shareholding): a credit or debit in a branch equivalent tax account aris- ing— (i) under section OE 10 (BETA credit for loss of shareholder continuity) and described in table O7: branch equivalent tax credits, row 5 (credit for loss of shareholder continuity); and under section OE 15 (BETA debit for loss of shareholder continuity) and described in table (b) (c) (ii) 1892 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OA 11 (4) O8: branch equivalent tax debits, row 5 (debit for loss of shareholder continuity).
Recording in imputation credit account If the amalgamated company does not maintain a memoran- dum account referred to in subsection (1)(b), (c), and (e), the credit or debit is recorded in the imputation credit account of the amalgamated company.

Seesections OA 11 to OA 13.
Deﬁned in this Act: amalgamated company, amalgamating company, branch equivalent tax account, CTR account, FDP account, imputation credit, imput- ation credit account, imputation debit, memorandum account, policyholder credit account, resident’s restricted amalgamation Compare: 2004 No 35 ss ME 29(1), MF 16(1), MG 17(1), MI 13 OA 11 FDP account on resident’s restricted amalgamation (1) (2) When this section applies This section applies on a resident’s restricted amalgamation if— (a) an amalgamating company ends its existence on amal- gamation; and at the time of amalgamation, the company maintains an FDP account; and the amalgamated company does not maintain an FDP account.
(b) (c) Credits and debits due A credit or a debit due to the amalgamating company for the purposes of the FDP account but not recorded before the date of amalgamation is recorded in the imputation credit account of the amalgamated company, as appropriate,— (a) under section OB 24 (ICA credit on resident’s restricted imputation amalgamation) as described in table O1: credits, row 22 (credit on resident’s restricted amalgam- ation); or under section OB 53 (ICA debit on resident’s restricted imputation amalgamation) as described in table O2: debits, row 26 (debit on resident’s restricted amalgam- ation).
(b) Deﬁned in this Act: amalgamated company, amalgamating company, FDP ac- count, imputation credit account, resident’s restricted amalgamation Compare: 2004 No 35 s MG 17(1) 1893 Part O s OA 12 Income Tax Act 2007 Reprinted as at 1 January 2010 OA 12 CTR account on resident’s restricted amalgamation [Repealed] Section OA 12: repealed (with effect on 30 June 2009), on 6 October 2009, by section 377(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OA 13 Policyholder credit account on resident’s restricted amalgamation When this section applies This section applies on a resident’s restricted amalgamation if— (a) an amalgamating company ends its existence on amal- gamation; and at the time of amalgamation, the company maintains a policyholder credit account; and the amalgamated company does not maintain a policy- holder credit account.
(b) (c) Credits and debits due A credit or a debit due to the amalgamating company for the purposes of the policyholder credit account but not recorded in the account before the date of amalgamation, is recorded in the imputation credit account of the amalgamated company, as appropriate,— (a) under section OB 24 (ICA credit on resident’s restricted amalgamation) as described in table O1: imputation credits, row 22 (credit on resident’s restricted amalgam- ation); or under section OB 53 (ICA debit on resident’s restricted amalgamation) as described in table O2: imputation debits, row 26 (debit on resident’s restricted amalgam- ation).
(b) Deﬁned in this Act: amalgamated company, amalgamating company, imput- ation credit account, policyholder credit account, resident’s restricted amalgam- ation Compare: 2004 No 35 s ME 29(1) (1) (2) 1894 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OA 14 Amalgamation of companies in consolidated groups OA 14 Continuity of shareholding when group companies amalgamate (1) (2) (3) (4) (5) What this section does This section and sections OA 15 to OA 17 apply when all the companies in a consolidated group or consolidated imput- ation group amalgamate on a resident’s restricted amalgam- ation, and the amalgamation results in— (a) (b) the end of the group’s existence; and the formation of an amalgamated company.
Other company The amalgamation may include a company that is not part of the consolidated group or consolidated imputation group.

Continuity of shareholding: credits and debits Subsections (4) and (5) apply for the purposes of determining whether a credit or debit arises in the memorandum account of the amalgamated company that is of the type referred to in section OA 2(1)(a), (b), (d), and (f).
Treatment of pre-amalgamation credits and debits A credit or debit recorded in the memorandum account of the consolidated group before the date of the amalgamation is treated as if it were recorded in the same type of account of the amalgamated company on the date it was recorded in the consolidated group’s account with effect from the date of amalgamation.
Treatment of pre-amalgamation period For the purposes of section OA 8(7)(b) and (8), in determining at a time after the amalgamation whether continuity of share- holding exists for the credit or debit in the memorandum ac- count, the amalgamated company is treated for all times before the amalgamation as if— (a) (b) it did not separately exist; and it were instead the consolidated group, with the same shareholders and option holders.
1895 Part O s OA 15 Income Tax Act 2007 Reprinted as at 1 January 2010 (6) Avoidance provisions For the purposes of determining the credits and debits in the memorandum account of a consolidated group, sections GB 34, GB 40, and GB 41 (which relate to arrangements to de- feat the application of certain provisions) apply, modiﬁed as necessary.
Deﬁned in this Act: amalgamated company, company, consolidated group, con- solidated imputation group, memorandum account, resident’s restricted amal- gamation, shareholder, voting interest Compare: 2004 No 35 ss ME 29(2)(a), MF 16(2)(a), MG 17(2)(a) OA 15 When credits or debits due to consolidated group but not recorded (1) (2) (3) When this section applies This section applies on a resident’s restricted amalgamation referred to in section OA 14 when, at the time of the amal- gamation, a consolidated group maintains— an imputation credit account: (a) an FDP account: (b) a branch equivalent tax account: (c) a policyholder credit account.
(d) Credits and debits due A credit or a debit due to the consolidated group but not recorded in its account before the date of amalgamation is recorded in the same type of memorandum account of the amalgamated company.

Subsections (3) and (4) override this subsection.
Exclusion: shareholder continuity rules Subsection (2) does not apply to— (a) a debit for loss of shareholder continuity in an imput- ation credit account arising under section OP 42 (Con- solidated ICA debit for loss of shareholder continuity) and described in table O20: imputation debits of con- solidated imputation groups, row 16 (debit for loss of shareholder continuity): a debit for an increase in resident shareholding in a CTR account arising under section OP 91 (Consolidated CTRA increase in resident shareholding) and described (b) 1896 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OA 16 (c) in table O24: CTR debits of consolidated groups, row 6 (increase in resident shareholding): a credit or debit in a branch equivalent tax account aris- ing— (i) under section OP 104 (Consolidated BETA credit for loss of shareholder continuity) and described in table O25: branch equivalent tax credits of consolidated BETA groups, row 5 (credit for loss of shareholder continuity); and under section OP 108 (Consolidated BETA debit for loss of shareholder continuity) and described in table O26: branch equivalent tax debits of con- solidated BETA groups, row 5 (debit for loss of shareholder continuity).
(ii) (4) Recording in imputation credit account If the amalgamated company does not maintain a memoran- dum account referred to in subsection (1)(b) or (d), the credit or debit is recorded in the imputation credit account of the amal- gamated company.

Seesections OA 16 and OA 17.
Deﬁned in this Act: amalgamated company, branch equivalent tax account, CTR account, consolidated group, FDP account, imputation credit account, pol- icyholder credit account, resident’s restricted amalgamation, shareholder, vot- ing interest Compare: 2004 No 35 ss ME 29(2)(b), MF 16(2)(b), MG 17(2)(b) OA 16 When FDP account ends on resident’s restricted amalgamation (1) When this section applies This section applies on a resident’s restricted amalgamation referred to in section OA 14 if— (a) a consolidated group ends its existence on amalgam- ation; and at the time of amalgamation, the consolidated group maintains an FDP account; and the amalgamated company does not maintain an FDP account.
(b) (c) 1897 Part O s OA 17 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Credits and debits due A credit or a debit due to the group but not recorded before the date of amalgamation is recorded in the imputation credit account of the amalgamated company, as appropriate,— (a) under section OB 24 (ICA credit on resident’s restricted amalgamation) as described in table O1: imputation credits, row 22 (credit on resident’s restricted amalgam- ation); or under section OB 53 (ICA debit on resident’s restricted amalgamation) as described in table O2: imputation debits, row 26 (debit on resident’s restricted amalgam- ation).
(b) Deﬁned in this Act: amalgamated company, consolidated group, FDP account, imputation credit account, resident’s restricted amalgamation, shareholder Compare: 2004 No 35 s MF 17(2)(b) OA 17 When policyholder credit account ends on resident’s restricted amalgamation (1) (2) When this section applies This section applies on a resident’s restricted amalgamation referred to in section OA 14 if,— (a) a consolidated group ends its existence on amalgam- ation; and at the time of amalgamation, the consolidated group maintains a policyholder credit account; and the amalgamated company does not maintain a policy- holder credit account.
(b) (c) No policyholder credit account A credit or a debit due to the group but not recorded before the date of amalgamation is recorded in the imputation credit account of the amalgamated company, as appropriate,— (a) under section OB 24 (ICA credit on resident’s restricted amalgamation) as described in table O1: imputation credits, row 22 (credit on resident’s restricted amalgam- ation); or under section OB 53 (ICA debit on resident’s restricted imputation amalgamation) as described in table O2: (b) 1898 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OA 18 debits, row 26 (debit on resident’s restricted amalgam- ation).
Deﬁned in this Act: amalgamated company, amalgamating company, consoli- dated group, imputation credit account, policyholder credit account, resident’s restricted amalgamation Compare: 2004 No 35 s ME 29(2) Maximum permitted ratios OA 18 Calculation of maximum permitted ratios (1) (2) (3) When this section applies This section applies in relation to an imputation credit, an FDP credit, a CTR credit, and a Maori authority credit, for the pur- poses of the calculation of— (a) (b) (c) (d) (e) (f) an imputation ratio; and an FDP ratio; and a combined imputation and FDP ratio; and a CTR ratio; and a combined imputation and CTR ratio; and a Maori authority credit ratio.
Maximum permitted ratio A dividend or distribution with a credit attached must not have a ratio for the amount of the credit to the amount of the divi- dend or distribution that is more than the maximum permitted ratio calculated using the formula— Deﬁnition of item in formula In the formula, tax rate is— (a) for subsection (1)(a) to (e), the basic rate of income tax set out in schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT and attributed fringe beneﬁts) for the income year in which the dividend is paid: for subsection (1)(f), the basic rate of income tax set out in schedule 1, part A, clause 7 for the income year in which the distribution is paid.
(b) 1899 Part O s OB 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Relationship with sections OZ 8 and OZ 9 Sections OZ 8 and OZ 9 (which relate to the calculation of maximum permitted ratios in certain income years) may apply to modify this section.
Deﬁned in this Act: amount, basic rate, combined imputation and CTR ratio, combined imputation and FDP ratio, CTR credit, dividend, FDP credit, imput- ation credit, income tax, income year, Maori authority credit ratio, maximum permitted ratio, pay, tax year Compare: 2004 No 35 ss ME 8(1), MG 8(1), MG 10(1), MI 8(1), MK 7(1) Section OA 18(3): substituted (with effect on 1 April 2008), on 7 December 2009, by section 85(1) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section OA 18(3): amended (with effect from 1 April 2008), on 29 May 2008, by section 36(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remed- ial Matters) Act 2008 (2008 No 36).

Section OA 18(3): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OA 18(4) heading: added, on 1 April 2008, by section 492 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OA 18(4): added, on 1 April 2008, by section 492 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OA 18 list of deﬁned terms pay: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Align- ment and Remedial Matters) Act 2009 (2009 No 63).
Subpart OB—Imputation credit accounts (ICA) Introductory provisions OB 1 General rules for companies with imputation credit accounts New Zealand resident A company that is resident in New Zealand (the imputation credit account (ICA) company) must establish and maintain an imputation credit account for a tax year.

Subsection (2) overrides this subsection.
Exclusions A company that is resident in New Zealand is excluded from being an ICA company if it is— a company that— (a) (1) (2) 1900 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 1 (i) (ii) (iii) (iv) (v) [Repealed] is acting in the capacity of trustee, not being a company that is a trustee, of a group investment fund to which paragraph (c) of the deﬁnition of company in YA 1 (Deﬁnitions) applies; or has a constitution that prohibits a distribution to a shareholder; or derives only exempt income other than income exempt under sections CW 9 to CW 11 (which relate to income from equity); or under a double tax agreement, is treated as not being resident in New Zealand; or (b) (c) (d) (e) (f) a Maori authority; or a local authority; or a Crown Research Institute; or a subsidiary of the Accident Compensation Corpor- ation affected by section 266 of the Injury Prevention, Rehabilitation, and Compensation Act 2001, or section 334(1) of the Accident Insurance Act 1998; or a portfolio tax rate entity.
Exception to subsection (2): Australian resident [Repealed] [Repealed] Deﬁned in this Act: company, Crown Research Institute, double tax agreement, exempt income, group investment fund, ICA company, imputation credit ac- count, income, local authority, Maori authority, New Zealand, portfolio tax rate entity, resident in New Zealand, shareholder, tax, tax year, trustee Compare: 2004 No 35 s ME 1 Section OB 1(1): amended (with effect on 1 April 2008), on 6 October 2009, by section 378(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 1(2)(a)(i): repealed (with effect on 1 April 2008), on 6 October 2009, by section 378(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 1(3) heading: repealed (with effect on 1 April 2008), on 6 October 2009, pursuant to section 378(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 1(3): repealed (with effect on 1 April 2008), on 6 October 2009, by section 378(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 1 list of deﬁned terms Australian ICA company: repealed (with effect on 1 April 2008), on 6 October 2009, by section 378(5) of the Taxation 1901 (3) Part O s OB 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 1 list of deﬁned terms resident in Australia: repealed (with effect on 1 April 2008), on 6 October 2009, by section 378(5) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OB 2 Australian companies with imputation credit accounts Company resident in Australia A company that is resident in Australia may choose to estab- lish and maintain an imputation credit account.
Ineligibility Despite meeting the residency requirements, a company is not eligible to make an election referred to in subsection (1) if— (a) the company— (i) (ii) is a company referred to in section OB 1(2)(a)(ii) to (iv), and (b) to (f); or is treated as resident in a country other than Aus- tralia under an agreement between Australia and the other country that would be a double tax agreement if negotiated between New Zealand and that other country; or (b) an earlier election has been revoked by the Commis- sioner under subsection (7)(b), and the company has not shown the Commissioner that it has taken adequate steps to prevent the grounds of revocation occurring again.
Election, and when status starts The election is made by notifying the Commissioner, and the company must maintain an imputation credit account from the following date, as applicable: (a) the ﬁrst day of the tax year in which the Commissioner is notiﬁed: for the purposes of section OB 60,— (i) (b) for a company that is formed or becomes eligible in the tax year, the ﬁrst day of the tax year in which the Commissioner receives the notice and the Commissioner notiﬁes the company of that date; or (1) (2) (3) 1902 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 2 (4) (5) (6) (7) (8) (ii) if subparagraph (i) does not apply, 30 days after the date on which the Commissioner receives the notice.
Joint and several liability A company that is part of the same wholly-owned group of companies as an Australian ICA company may have joint and several liability with the Australian ICA company for further income tax, civil penalties, and interest under Part 7 of the Tax Administration Act 1994 imposed on the Australian ICA company for a breach by the Australian ICA company of the imputation rules.
Exclusion Despite subsection (4), no joint and several liability arises if the Australian ICA company is prohibited by an independent regulatory body from being subject to the liability.

Dividend in Australian currency An Australian ICA company that pays a dividend in Australian currency must make a currency conversion under section OB 60(6).
How status ends A company ends its status as an Australian ICA company if— the company becomes ineligible to maintain an imput- (a) ation credit account; or the company revokes the election by notifying the Com- missioner; or the Commissioner gives the company notice revoking the election.
(b) (c) When status ends For the purposes of subsection (7), the company ends its status as an Australian ICA company— (a) from the day on which the relevant circumstance of in- eligibility in subsection (2) applies; or unless paragraph (c) applies, from the last day of the tax year in which the company or the Commissioner revokes the election; or for the purposes of section OB 60,— (b) (c) 1903 Part O s OB 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (9) (i) (ii) when the company notiﬁes the Commissioner, on the date on which the Commissioner receives the notice; or on the date set out in the Commissioner’s notice.
Outstanding obligations A company that stops being an Australian ICA company for a tax year must nevertheless satisfy all obligations that the com- pany had as an Australian ICA company.
Deﬁned in this Act: Australian ICA company, Commissioner, company, divi- dend, double tax agreement, imputation credit account, imputation rules, in- come, New Zealand, notice, notify, pay, resident in Australia, tax year, wholly- owned group of companies Compare: 2004 No 35 s ME 1A Section OB 2(1) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 379(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 2(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 379(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 2(2)(a)(i): amended, on 1 April 2008, by section 493(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OB 2(2)(a)(ii): substituted, on 1 April 2008, by section 493(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OB 2 list of deﬁned terms resident in New Zealand: repealed (with effect on 1 April 2008), on 6 October 2009, by section 379(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OB 3 Imputation credit accounts General rules The general rules on memorandum accounts set out in sec- tions OA 2 and OA 3 (which relate to the treatment of memo- randum accounts) apply to an imputation credit account of an ICA company.
Consolidated imputation groups Under section OP 2 (When credits and debits arise only in group accounts), certain credits and debits do not arise in an (1) (2) 1904 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 4 ICA company’s memorandum account if the company is part of a consolidated imputation group.
Deﬁned in this Act: consolidated imputation group, ICA company, imputation credit account, memorandum account Compare: 2004 No 35 s ME 13(1) OB 4 ICA payment of tax Imputation credits (1) (2) (3) Credit An ICA company has an imputation credit for an amount of income tax or provisional tax paid.

Subsection (3) overrides this subsection.

Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 2 (payment of tax).
No credit An ICA company does not have an imputation credit for an amount of— (a) a transfer from a tax pooling account to a tax account with the Commissioner; or income tax paid on income derived when the company is not an ICA company; or income tax paid by a life insurer to satisfy its policy- holder base income tax liability; or income tax paid under sections LA 2 and LE 1 (which relate to tax credits for imputation credits and their use) by crediting an imputation credit; or income tax paid under subpart LA and section LF 1 (which relate to tax credits for FDP credits and their use) by crediting a foreign dividend payment (FDP) credit; or income tax paid by a tax credit under subpart LA and section LH 2 (which relate to tax credits for research development and their use); or income tax paid by a tax credit under subpart LP (Tax credits for supplementary dividends); or further income tax applied under section OB 69 to pay income tax or provisional tax; or (b) (c) (d) (e) (eb) (f) (g) 1905 Part O s OB 5 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) (5) (h) (i) income tax paid under section OE 7 (BETA payment of income tax) by crediting a branch equivalent tax credit; or income tax paid as a trustee, unless paid on category A income of the type described in paragraph (c) of the deﬁnition of company in section YA 1 (Deﬁnitions).
Credit date The credit date is the day the tax is paid.

Limitation on credits No amount may give rise to more than 1 imputation credit.
Deﬁned in this Act: amount, branch equivalent tax account, category A income, Commissioner, company, tax credit, FDP credit, further income tax, ICA com- pany, imputation credit, imputation credit account, income, income tax, life in- surer, pay, policyholder base income tax liability, provisional tax, tax account with the Commissioner, tax pooling account, tax year, trustee Compare: 2004 No 35 s ME 4(1)(a), (1C), (2)(a) Section OB 4(3)(c): substituted (with effect on 1 April 2008), on 7 December 2009, by section 86 of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section OB 4(3)(e): substituted (with effect on 1 April 2008), on 6 October 2009, by section 381(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 4(3)(eb): substituted (with effect on 1 April 2008), on 6 October 2009, by section 381(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 4(3)(eb): inserted, on 1 April 2008, by section 494 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

OB 5 ICA deposit in tax pooling account Credit An ICA company has an imputation credit for an amount pro- vided by it and paid by an intermediary into a tax pooling ac- count.

Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 3 (deposit in tax pooling account).
Credit date The credit date is the day the amount is deposited.
Deﬁned in this Act: amount, ICA company, imputation credit, imputation credit account, intermediary, pay, tax pooling account Compare: 2004 No 35 s ME 4(1)(ac), (2)(ac) (1) (2) (3) 1906 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 7 OB 6 ICA transfer from tax pooling account (1) (2) (3) Credit An ICA company has an imputation credit for an amount that represents an entitlement to funds held in a tax pooling ac- count and transferred by an intermediary to the company’s tax account with the Commissioner or refunded to the company.
Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 4 (transfer from tax pooling ac- count).

Credit date The credit date is— (a) the effective date under sections RP 19 and RP 20 (which relate to transfers from tax pooling account) if the amount is transferred to the company’s tax account with the Commissioner; or the day the refund is made to the company.
(b) Deﬁned in this Act: amount, Commissioner, ICA company, imputation credit, intermediary, tax account with the Commissioner, tax pooling account Compare: 2004 No 35 s ME 4(1)(ad), (2)(ad) OB 7 ICA payment of further income tax (1) (2) (3) Credit An ICA company has an imputation credit for an amount of further income tax paid under section OB 65 or OB 66.

Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 5 (payment of further income tax).
Credit date The credit date is the day the further income tax is paid.

Deﬁned in this Act: amount, further income tax, ICA company, imputation credit, pay Compare: 2004 No 35 s ME 4(1)(c), (2)(a) 1907 Part O s OB 7B Income Tax Act 2007 Reprinted as at 1 January 2010 OB 7B ICA payment of qualifying company election tax (1) (2) (3) Credit An ICA company has an imputation credit for an amount of qualifying company election tax paid under section HA 40 (Li- ability for qualifying company election tax).
Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 5B (payment of qualifying com- pany election tax).

Credit date The credit date is the day the qualifying company election tax is paid.
Deﬁned in this Act: amount, ICA company, imputation credit, pay, qualifying company election tax Compare: 2004 No 35 s ME 4(1)(ae), (2)(ae) Section OB 7B: inserted, on 1 April 2008, by section 495 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
OB 7C ICA expenditure on research and development Credit An ICA company has an imputation credit for an amount of a tax credit that the company has under section LH 2 (Tax credits relating to expenditure on research and development).

Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 5C (tax credit for research and development expenditure).
Credit date The credit date is the day the Commissioner is notiﬁed in the company’s return of income of the entitlement to the credit.

Deﬁned in this Act: amount, Commissioner, ICA company, imputation credit, return of income, tax credit Compare: 2004 No 35 s ME 4(1)(ib), (2)(g) Section OB 7C: inserted, on 1 April 2008, by section 495 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
(1) (2) (3) 1908 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 9B OB 8 ICA resident withholding tax withheld (1) (2) (3) Credit An ICA company has an imputation credit for resident with- holding tax (RWT) that is treated under section RA 9(1)(b) (Treatment of amounts withheld as received) as derived by the company.

Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 6 (amount of tax withheld for resident passive income).
Credit date The credit date is the day the amount of tax is withheld.

Deﬁned in this Act: amount, amount of tax, ICA company, imputation credit, resident passive income, resident withholding tax, RWT Compare: 2004 No 35 s ME 4(1)(i), (2)(g) OB 9 ICA dividend derived with imputation credit (1) (2) (3) Credit An ICA company has an imputation credit for the amount of an imputation credit attached to a dividend derived by the com- pany.
Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 7 (dividend derived with imput- ation credit).

Credit date The credit date is the day the dividend is paid to the company.
Deﬁned in this Act: amount, dividend, ICA company, imputation credit, pay Compare: 2004 No 35 s ME 4(1)(d), (2)(c) OB 9B ICA company allocated imputation credit with income from PTRE (1) Credit An ICA company that is an investor in a portfolio tax rate entity has an imputation credit for the amount of an imputation credit allocated to it under section HL 29(7)(b).
1909 Part O s OB 10 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 7B (imputation credit allocated with income from PTRE).

Credit date The credit date is the day the amount is allocated.
Deﬁned in this Act: amount, ICA company, imputation credit, portfolio tax rate entity Section OB 9B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 383 of the Taxation (International Taxation, Life Insurance, and Remed- ial Matters) Act 2009 (2009 No 34).
OB 10 ICA dividend derived with FDP credit (1) (2) (3) Credit An ICA company has an imputation credit for the amount of an FDP credit attached to a dividend derived by the company when it is not a foreign dividend payment account (FDPA) company.

Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 8 (dividend derived with FDP credit).

Credit date The credit date is the day the dividend is paid.
Deﬁned in this Act: amount, dividend, FDP credit, FDPA company, ICA com- pany, imputation credit, pay Compare: 2004 No 35 s ME 4(1)(e), (2)(c) OB 11 ICA payment of FDP [Repealed] Section OB 11: repealed (with effect on 30 June 2009), on 6 October 2009, by section 385(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OB 12 ICA transfer from FDP account Credit An ICA company has an imputation credit for an amount equal to the amount of an FDP debit transferred from its FDP ac- (1) 1910 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 13 (2) (3) count under section OC 18 (FDPA transfer to imputation credit account).

Table references The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 10 (transfer from FDP account).
The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 7 (transfer to imputation credit account).

Credit date The credit date is the day the amount is transferred.
Deﬁned in this Act: amount, FDP account, FDP debit, ICA company, imput- ation credit Compare: 2004 No 35 s ME 4(1)(g), (2)(e) OB 13 ICA transfer of debit balance on leaving wholly-owned group (1) (2) Election If the requirements of subsections (2) and (3) are met, an ICA company may choose to transfer a debit balance in its imput- ation credit account when the company stops being part of a wholly-owned group of companies.
Eligibility The company may make an election under subsection (1) if, at a particular time,— (a) the company is or has recently been part of a wholly- owned group of companies; and the company is no longer part of the group, or will shortly no longer be part of the group; and the company has a debit balance in its imputation credit account; and the group has a loss balance carried forward from earlier tax years of more than $1,000,000 for the income year before the particular time.
(b) (c) (d) (3) Credit and debit The company may choose that an amount of no more than the debit balance is— (a) an imputation credit in its imputation credit account; and 1911 Part O s OB 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) an imputation debit in the imputation credit account of another company in the group after the date on which the company stops being part of the wholly-owned group.
Table references The imputation credit in subsection (3)(a) is referred to in table O1: imputation credits, row 11 (debit balance on leav- ing wholly-owned group).

The imputation debit in subsection (3)(b) is referred to in table O2: imputation debits, row 17 (debit balance on leaving wholly-owned group).
Form and timing of election The company must make the election— (a) (b) in a form that the Commissioner may require; and with a notice of agreement from the group company in whose account the imputation debit arises under sub- section (3)(b); and before the company stops being part of the wholly- owned group.
(c) Further time For the purposes of subsection (5)(b), the Commissioner may allow further time in which to provide the notice if the com- pany did not have sufﬁcient information at the time it stops being part of the wholly-owned group.

Credit date The credit date is the day the company stops being part of the wholly-owned group.
Deﬁned in this Act: amount, Commissioner, company, ICA company, imput- ation credit, imputation credit account, imputation debit, income year, notice, tax loss, wholly-owned group of companies Compare: 2004 No 35 ss ME 4(1)(cb), (2)(bb), ME 9B(1), (2) (4) (5) (6) (7) OB 14 ICA payment of tax on leaving wholly-owned group Credit An ICA company has an imputation credit for a payment of imputation additional tax that it chooses to pay under section OB 71, excluding an excess tax payment applied under section OB 71(8).
(1) 1912 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 16 (2) (3) Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 12 (payment of tax on leaving wholly-owned group).

Credit date The credit date is the day the imputation additional tax is paid to the Commissioner.
Deﬁned in this Act: amount, Commissioner, excess tax payment, ICA com- pany, imputation additional tax, imputation credit, pay Compare: 2004 No 35 s ME 4(1)(cc), (2)(bc) OB 15 ICA payment of tax on joining wholly-owned group (1) (2) (3) Credit An ICA company has an imputation credit for a payment of imputation additional tax for which it is liable under section OB 72, excluding an excess tax payment applied under section OB 72(9).
Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 13 (payment of tax on joining wholly-owned group).

Credit date The credit date is the day the imputation additional tax is paid to the Commissioner.
Deﬁned in this Act: amount, Commissioner, excess tax payment, ICA com- pany, imputation additional tax, imputation credit, pay Compare: 2004 No 35 s ME 4(1)(cd), (2)(bd) OB 16 ICA attribution for personal services (1) (2) Credit An ICA company that is not a qualifying company has an im- putation credit for an amount equal to 42.86% of the personal services attribution under section GB 29 (Attribution rule: cal- culation).
Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 14 (attribution for personal ser- vices).

1913 Part O s OB 17 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Credit date The credit date is the last day of the tax year for which the attribution is made.
Deﬁned in this Act: amount, ICA company, imputation credit, imputation credit account, qualifying company, tax year Compare: 2004 No 35 s ME 4(1)(ab), (2)(ab) Section OB 16(1): amended, on 1 April 2008, by section 496 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OB 17 ICA transfer from policyholder credit account (1) (2) (3) Credit An ICA company has an imputation credit for an amount equal to the amount of a debit under section OJ 9 (PCA transfer to imputation credit account) for a transfer of a credit balance from its policyholder credit account.

Table references The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 15 (transfer from policyholder credit account).
The policyholder debit in subsection (1) is referred to in table O14: policyholder debits, row 3 (transfer to imputation credit account).

Credit date The credit date is the day the amount is transferred.

Deﬁned in this Act: amount, ICA company, imputation credit, policyholder credit account Compare: 2004 No 35 s ME 4(1)(j), (2)(h) OB 18 ICA transfer from ASC account Credit An ICA company has an imputation credit for the transfer of an amount from its available subscribed capital (ASC) account.
The amount is calculated under section OF 5(4) (ASCA trans- fer to imputation credit account).

Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 16 (transfer from ASC account).

(1) (2) 1914 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 19 (3) Credit date The credit date is the day the amount is transferred.
Deﬁned in this Act: amount, ASC account, ICA company, imputation credit, imputation credit account Compare: 2004 No 35 s ME 4(1)(da), (2)(ca) OB 19 ICA transfer to master fund (1) (2) (3) (4) Credit An ICA company that is a master fund has an imputation credit for the transfer of an amount of expenditure under sections DV 5 to DV 7 (which relate to the transfer of expenditure to master funds).

The amount is calculated using the formula— expenditure transferred × tax rate.
Deﬁnition of items in formula In the formula,— (a) expenditure transferred is the amount of expenditure transferred under sections DV 5 to DV 7 (which relate to the expenditure of investment funds) to the company as a master fund: tax rate is the basic rate of income tax set out in sched- ule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts).
(b) Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 17 (transfer to master fund).

Credit date The credit date is the last day of the tax year corresponding to the income year in which the expenditure is deducted.
Deﬁned in this Act: amount, basic rate, ICA company, imputation credit, im- putation credit account, income tax, master fund Compare: 2004 No 35 s ME 4(1)(aab), (2)(aab) Section OB 19(1): amended (with effect on 1 April 2008), on 6 October 2009, by section 387(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 19(2)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1915 Part O s OB 20 Income Tax Act 2007 Reprinted as at 1 January 2010 OB 20 ICA distribution with Maori authority credit (1) (2) (3) Credit An ICA company has an imputation credit for the amount of a Maori authority credit attached to a distribution received by the company.

Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 18 (distribution with Maori au- thority credit).

Credit date The credit date is the day the distribution is paid.
Deﬁned in this Act: amount, ICA company, imputation credit, Maori authority credit, pay Compare: 2004 No 35 s ME 4(1)(ea), (2)(cb) OB 21 ICA balance of Maori authority credit account Credit An ICA company has an imputation credit for an amount equal to the amount of a Maori authority debit under section OK 18 (MACA ﬁnal balance) when the Maori authority stops being a Maori authority.
Table references The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 19 (balance of Maori authority credit account).

The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 10 (ﬁnal balance).

Credit date The credit date is the same as the debit date recorded for the debit under section OK 18.
Deﬁned in this Act: amount, ICA company, imputation credit, Maori authority, Maori authority debit Compare: 2004 No 35 s ME 4(1)(k), (2)(k) (1) (2) (3) 1916 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 24 OB 22 ICA replacement payment to company under share-lending arrangement (1) (2) (3) Credit An ICA company has an imputation credit for the amount of an imputation credit attached under section OB 64, or treated as attached under section RE 25 (When amount of tax treated as imputation credit) to a replacement payment paid under a share-lending arrangement to the company.
Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 20 (replacement payment under share-lending arrangement).

Credit date The credit date is the day the replacement payment is paid.
Deﬁned in this Act: amount, ICA company, imputation credit, pay, replacement payment, share-lending arrangement Compare: 2004 No 35 s ME 4(1)(eb), (ec), (2)(cc) OB 23 ICA credit transfer to company (1) (2) (3) Credit An ICA company has an imputation credit for the amount of an imputation credit shown in a credit transfer notice given to the company.

Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 21 (credit in credit transfer no- tice).
Credit date The credit date is the day the notice is given.
Deﬁned in this Act: amount, credit transfer notice, ICA company, imputation credit Compare: 2004 No 35 s ME 4(1)(ed), (2)(cd) OB 24 ICA credit on resident’s restricted amalgamation (1) Credit An ICA company has an imputation credit for the amount of a credit that arises on or after a resident’s restricted amal- 1917 Part O s OB 24 Income Tax Act 2007 Reprinted as at 1 January 2010 gamation in the imputation credit account of the amalgamated company under 1 of the sections listed in subsection (3).
Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 22 (credit on resident’s restricted amalgamation).
Sections The sections are— (a) section OA 10 (When credits or debits due to amalgam- ating company but not recorded) for imputation credits in the imputation credit account of an amalgamating company: section OA 11 (FDP account on resident’s restricted amalgamation) for an FDP credit in the FDP account of an amalgamating company because the amalgamated company does not maintain an FDP account: section OA 12 (CTR account on resident’s restricted amalgamation) for the conduit tax relief (CTR) credits in the CTR account of an amalgamating company be- cause the amalgamated company does not maintain a CTR account: section OA 13 (Policyholder credit account on resi- dent’s restricted amalgamation) for a policyholder credit in the policyholder credit account of an amal- gamating company because the amalgamated company does not maintain a policyholder credit account: section OA 14 (Continuity of shareholding when group companies amalgamate) for imputation credits in the imputation credit account of a consolidated imputation group that ends its existence on the amalgamation: section OA 16 (When FDP account ends on resident’s restricted amalgamation) for an FDP credit in the FDP account of a consolidated FDP group because the amal- gamated company does not maintain an FDP account: section OA 17 (When policyholder credit account ends on resident’s restricted amalgamation) for the policyholder credits in the policyholder credit account (b) (c) (d) (e) (f) (g) (2) (3) 1918 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 26 of a consolidated group because the company does not maintain a policyholder credit account.
Deﬁned in this Act: amalgamated company, amalgamating company, amount, CTR account, CTR credit, consolidated FDP group, consolidated group, con- solidated imputation group, FDP account, FDP credit, ICA company, imput- ation credit, imputation credit account, policyholder credit, policyholder credit account, resident’s restricted amalgamation Compare: 2004 No 35 ss ME 29, MG 17, MI 13 OB 25 ICA reversal of tax advantage arrangement (1) (2) (3) (4) When this section applies This section applies when it is established that an imputation credit in an ICA company’s imputation credit account was in- correctly determined to be the subject of an arrangement to obtain a tax advantage.
Credit The company has an imputation credit for an amount equal to the amount of a debit in the company’s imputation credit account under section OB 54.

Table references The imputation credit in subsection (2) is referred to in table O1: imputation credits, row 23 (reversal of tax advantage ar- rangement).

The imputation debit in subsection (2) is referred to in table O2: imputation debits, row 27 (tax advantage ar- rangement).
Credit date The credit date is the same as the debit date of the debit under section OB 54.
Deﬁned in this Act: amount, arrangement, ICA company, imputation credit, imputation credit account, imputation debit, tax advantage Compare: 2004 No 35 s ME 4(1)(h), (2)(f) OB 26 ICA elimination of double debit (1) When this section applies This section applies when an imputation debit in an ICA com- pany’s imputation credit account under section OB 41 has the effect of cancelling an imputation credit under section OB 5.
1919 Part O s OB 26 Income Tax Act 2007 Reprinted as at 1 January 2010 Credit The company has an imputation credit for an amount equal to the amount of the debit referred to in subsection (1), and either— (a) another debit arises under section OB 34 for a refund of the amount of the deposit on a debit date after the debit date for the debit for loss of shareholder continuity; or the deposit is taken into account under section RP 19 (Transfers from tax pooling accounts) in determining the balance of the company’s tax account with the Com- missioner after the debit date for the debit for loss of shareholder continuity.
(b) Table references The table references are as follows: (a) the imputation debit in subsection (1) is referred to in table O2: imputation debits, row 14 (debit for loss of shareholder continuity): the imputation credit in subsection (1) is referred to in table O1: imputation credits, row 3 (deposit in tax pool- ing account): the imputation credit in subsection (2) is referred to in table O1: imputation credits, row 24 (elimination of double debit): the imputation debit in subsection (2)(a) is referred to in table O2: imputation debits, row 6 (refund from tax pooling account).
(b) (c) (d) Credit date The credit date is the day— (a) (b) the deposit is refunded; or the credit arises in the company’s tax account with the Commissioner.
Deﬁned in this Act: amount, Commissioner, ICA company, imputation credit, imputation credit account, imputation debit, shareholder, tax account with the Commissioner Compare: 2004 No 35 s ME 4(1A), (2A) (2) (3) (4) 1920 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 29 OB 27 ICA non-resident withholding tax withheld (1) (2) (3) Credit An Australian ICA company has an imputation credit for an amount of tax withheld by the payer of non-resident passive income.
Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 25 (NRWT withheld).

Credit date The credit date is the day the amount of tax is withheld.
Deﬁned in this Act: amount, amount of tax, Australian ICA company, imput- ation credit, non-resident passive income, non-resident withholding tax, NRWT Compare: 2004 No 35 s ME 4(1B)(a), (2B)(a) OB 28 ICA payment of amount of tax for schedular payment (1) (2) (3) Credit An Australian ICA company has an imputation credit for an amount equal to the amount of tax for a schedular payment paid to the company as a non-resident contractor.
Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 26 (amount of tax for schedular payment).

Credit date The credit date is the day the amount of tax is withheld.
Deﬁned in this Act: amount, amount of tax, Australian ICA company, imput- ation credit, non-resident contractor, pay, schedular payment Compare: 2004 No 35 s ME 4(1B)(b), (2B)(b) OB 29 ICA payment of schedular income tax (1) Credit An Australian ICA company has an imputation credit for a payment of income tax relating to the company’s schedular in- come tax liability for income derived under section CR 3, CV 16, or CV 17 (which relate to non-resident insurers, shippers, and ﬁlm renters).
1921 Part O s OB 30 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Table reference The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 27 (payment of schedular income tax).

Credit date The credit date is the day the schedular income tax is paid.
Deﬁned in this Act: Australian ICA company, company, imputation credit, in- come, pay, schedular income Compare: 2004 No 35 s ME 4(1B)(c), (2B)(c) OB 30 ICA payment of dividend Imputation debits (1) (2) (3) (4) Debit An ICA company has an imputation debit for the amount of an imputation credit attached to a dividend paid by the company.

Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 2 (payment of dividend).
Debit date The debit date is the day the dividend is paid.

Arrangement for dividend from another company Section GB 37 (Arrangements for payment of dividend by other companies) may apply to treat an amount as a debit under this section.
Deﬁned in this Act: amount, dividend, ICA company, imputation credit, im- putation debit, pay Compare: 2004 No 35 s ME 5(1)(a), (2)(a) OB 31 ICA allocation of provisional tax Debit An ICA company has an imputation debit for an amount of provisional tax allocated by the company under section RC 32 (Wholly-owned groups of companies) to an underpaid com- pany.

Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 3 (allocation of provisional tax).
(1) (2) 1922 (1) (2) (3) Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 32 (3) Debit date The debit date is the day the Commissioner is notiﬁed of the allocation.

Deﬁned in this Act: amount, Commissioner, company, ICA company, imput- ation debit, notify, provisional tax Compare: 2004 No 35 s ME 5(1)(d), (2)(d) OB 32 ICA refund of income tax Debit An ICA company has an imputation debit for the amount of a refund of income tax paid to the company.

Subsection (2) overrides this subsection.
No debit A debit under subsection (1) does not include— (a) a refund of income tax paid for a period when the com- pany was not an ICA company; or a refund of income tax paid before a debit arises under section OB 41, but only to the extent to which the amount of the refund is less than the amount of the debit; or a refund under subpart LP (Tax credits for supplemen- tary dividends) because the supplementary dividend generating the refund was paid before a debit arises under section OB 41, but only to the extent to which the amount of the refund is less than the amount of the debit.
Table references The table references are as follows: (a) the imputation debit in subsection (1) is referred to in table O2: imputation debits, row 4 (refund of income tax): the imputation debit in subsection (2)(b) is referred to in table O2: imputation debits, row 14 (debit for loss of shareholder continuity): the imputation debit in subsection (2)(c) is referred to in table O2: imputation debits, row 14 (debit for loss of shareholder continuity).
(b) (c) (b) (c) 1923 Part O s OB 33 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) (5) (6) (7) Part-year ICA company The amount of the debit that arises if the company is an ICA company for only part of a tax year is an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (a) ICA days is the number of days in which the company is an ICA company: refund is the amount of the refund.

(b) Debit date The debit date is the day the refund is made.
Relationship with section OB 37 This section does not apply to an amount that gives rise to a debit under section OB 37.

Deﬁned in this Act: amount, company, ICA company, imputation debit, income tax, pay, shareholder, supplementary dividend, tax year Compare: 2004 No 35 s ME 5(1)(e), (2)(e) Section OB 32(7) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 388(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 32(7): added (with effect on 1 April 2008), on 6 October 2009, by section 388(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OB 33 ICA amount applied to pay other taxes Debit An ICA company has an imputation debit for— (a) an amount of overpaid income tax applied to pay an amount due under the Inland Revenue Acts: an increased amount of tax as described in section RP 17B(3) (Tax pooling accounts and their use) applied to pay an amount due under the Inland Revenue Acts other than income tax.
(b) (1) 1924 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 34 (2) (3) (4) (5) Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 5 (amount applied to pay other taxes).
(b) No debit A debit under subsection (1) does not include an amount of overpaid income tax— (a) applied to satisfy a liability for income tax or provi- sional tax; or relating to income tax paid before an imputation debit arises under section OB 41 (table O2: imputation debits, row 14 (debit for loss of shareholder continuity)), but only to the extent to which the amount of overpaid in- come tax is no more than the amount of the debit for loss of shareholder continuity.
Debit date The debit date is the day the amount is applied.

Relationship with section OB 37 This section does not apply to an amount that gives rise to a debit under section OB 37.
Deﬁned in this Act: amount, ICA company, imputation debit, income tax, In- land Revenue Acts, pay, provisional tax, shareholder Compare: 2004 No 35 s ME 5(1)(l), (2)(k) Section OB 33(1): substituted, on 6 October 2009, by section 389(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 33(5) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 389(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 33(5): added (with effect on 1 April 2008), on 6 October 2009, by section 389(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OB 34 ICA refund from tax pooling account (1) When this section applies This section applies when an ICA company pays an intermedi- ary an amount that gives rise to an imputation credit under the following sections, and the amount is later refunded by the intermediary from the tax pooling account: 1925 Part O s OB 34 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) section OB 5 (table O1: imputation credits, row 3 (de- posit in tax pooling account)); or section OB 6 (table O1: (transfer from tax pooling account)).
imputation credits, row 4 Debit The company has an imputation debit for the amount of the refund.

Table reference The imputation debit in subsection (2) is referred to in table O2: imputation debits, row 6 (refund from tax pooling ac- count).
Debit date for companies other than qualifying companies The debit date for a company that is not a qualifying com- pany is the date found by applying the following paragraphs in order: (a) the last day of the previous tax year to the extent of the amount of the debit that is no more than the credit balance in the imputation credit account on that date: the day the refund or transfer is made to the extent of the remaining amount of the debit that is no more than the credit balance in the imputation credit account on the day of refund or transfer: the last day of the previous tax year for the remainder of the debit.
(b) (c) Debit date for qualifying companies The debit date for a qualifying company is the day the refund or transfer is made.
Deﬁned in this Act: amount, company, ICA company, imputation credit, imput- ation credit account, imputation debit, intermediary, pay, qualifying company, tax year Compare: 2004 No 35 s ME 5(1)(ea), (2)(ea), (eb) Section OB 34(4) heading: substituted (with effect on 1 April 2008), on 6 Oc- tober 2009, by section 390(1) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 34(4): substituted (with effect on 1 April 2008), on 6 October 2009, by section 390(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 34(5) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 390(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(2) (3) (4) (5) 1926 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 35 Section OB 34(5): added (with effect on 1 April 2008), on 6 October 2009, by section 390(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 34 list of deﬁned terms company: inserted (with effect on 1 April 2008), on 6 October 2009, by section 390(2) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 34 list of deﬁned terms imputation credit account: inserted (with effect on 1 April 2008), on 6 October 2009, by section 390(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 34 list of deﬁned terms qualifying company: added (with effect on 1 April 2008), on 6 October 2009, by section 390(2) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 34 list of deﬁned terms tax year: added (with effect on 1 April 2008), on 6 October 2009, by section 390(2) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OB 35 ICA transfer within tax pooling account (1) (2) (3) (4) When this section applies This section applies when an ICA company pays an intermedi- ary an amount that gives rise to an imputation credit under the following sections, and the entitlement to the amount is later transferred to another person in the tax pooling account: (a) section OB 5 (table O1: imputation credits, row 3 (de- posit in tax pooling account)); or section OB 6 (table O1: (transfer from tax pooling account)).
imputation credits, row 4 (b) Debit The company has an imputation debit for a tax year for the amount of the transfer of the entitlement to funds in the tax pooling account.

Table reference The imputation debit in subsection (2) is referred to in table O2: imputation debits, row 7 (transfer within tax pooling ac- count).
Debit date for companies other than qualifying companies The debit date for a company that is not a qualifying company is— 1927 Part O s OB 36 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) (c) the last day of the previous tax year to the extent of the amount of the debit that is no more than the credit balance in the account on that date; or the day the transfer is made to the extent of the remain- ing amount of the debit that is no more than the credit balance in the imputation credit account on the day of the transfer; or the last day of the previous tax year for the remainder of the debit.
Debit date for qualifying companies The debit date for a qualifying company is the day the refund is made.
Deﬁned in this Act: amount, ICA company, imputation credit, imputation credit account, imputation debit, intermediary, pay, qualifying company, tax pooling account, tax year Compare: 2004 No 35 s ME 5(1)(eb), (2)(ea), (eb) Section OB 35(4)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 391 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(5) OB 36 ICA refund of FDP (1) (2) (3) Debit An ICA company has an imputation debit for the amount of a refund of FDP paid to the company when it is not an FDPA company.

Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 8 (refund of FDP).

Debit date The debit date is the day the refund is made.
Deﬁned in this Act: amount, FDP, FDPA company, ICA company, imputation debit, pay Compare: 2004 No 35 s ME 5(1)(g), (2)(g) OB 37 ICA refund of tax credit Debit An ICA company has an imputation debit for— (a) the amount of a transfer under section LA 6(2)(d) (Re- maining refundable credits: PAYE, RWT, and certain (1) 1928 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 37 (b) (c) other items) to the extent to which the transfer does not lead to a refund of income tax: the amount of a refund to the company under section LA 6(2)(e): an amount used by the company under section LH 2(6) (Tax credits relating to expenditure on research and de- velopment) to pay an amount payable under an Inland Revenue Act to the extent to which the use does not lead to a refund of income tax.
Exclusion: FDPA companies (1B) Despite subsection (1), an FDPA company does not have an imputation debit to the extent to which the amount transferred, refunded, or used is a tax credit under subpart LF (Tax credits for FDP credits).

(2) (3) Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 9 (refund of tax credit).
Debit date The debit date is— (a) for a debit referred to in subsection (1)(a), the day the amount is transferred: for a debit referred to in subsection (1)(b), the day the amount is refunded: for a debit referred to in subsection (1)(c), the day the amount is applied.
(b) (c) Deﬁned in this Act: amount, FDPA company, ICA company, imputation debit, pay Compare: 2004 No 35 s ME 5(1)(h), (2)(e) Section OB 37(1) heading: substituted (with effect on 1 April 2008), on 6 Oc- tober 2009, by section 393(1) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 37(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 393(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 37(1B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 393(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 37(1B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 393(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

1929 Part O s OB 38 Income Tax Act 2007 Reprinted as at 1 January 2010 Section OB 37(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 393(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OB 38 ICA overpayment of FDP (1) (2) (3) (4) Debit An ICA company has an imputation debit for an amount of overpaid FDP applied to pay an amount due under the Inland Revenue Acts.

This subsection applies only to a company at a time when it is not an FDPA company.

subsection (3) over- rides this subsection.

Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 10 (overpayment of FDP).
No debit The debit does not include an overpayment of FDP applied to satisfy a liability for income tax or provisional tax, or relating to a foreign dividend.

Debit date The debit date is the day the amount is applied.
Deﬁned in this Act: amount, FDP, foreign dividend, ICA company, imputation debit, income tax, Inland Revenue Acts, pay, provisional tax Compare: 2004 No 35 s ME 5(1)(m), (2)(k) OB 39 ICA transfer for net foreign attributed income [Repealed] Section OB 39: repealed (with effect on 30 June 2009), on 6 October 2009, by section 395(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 39(1): amended (with effect on 1 April 2008), on 6 October 2009, by section 394(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OB 40 ICA attribution for personal services Debit An ICA company has an imputation debit for an amount of an attribution for personal services equal to the amount of an imputation credit under section OB 16.
(1) 1930 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 41 (2) (3) (4) Table references The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 13 (attribution for personal ser- vices).

The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 14 (attribution for personal services).
Accounts adjusted A debit under subsection (1) is recorded in the imputation credit account only if the company has accounted for an attri- bution of income under section GB 29 (Attribution rule: cal- culation).

Debit date The debit date is the last day of the tax year that falls in the income year for which the company accounts in its ﬁnancial statements for the attribution of income referred to in subsec- tion (3).
Deﬁned in this Act: amount, ﬁnancial statements, ICA company, imputation credit, imputation credit account, imputation debit, income, income year, tax year Compare: 2004 No 35 s ME 5(1)(ia), (2)(ha) OB 41 ICA debit for loss of shareholder continuity (1) (2) Debit An ICA company has an imputation debit for the amount equal to the amount of an imputation credit retained in the imput- ation credit account and unused at the time at which share- holder continuity is lost.
Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 14 (debit for loss of shareholder continuity).

When debit arises The debit arises at the time shareholder continuity is lost.

(3) 1931 Part O s OB 42 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Avoidance arrangements Section GB 34 (ICA arrangements for carrying amounts for- ward) may exclude a company from the application of this sec- tion.
Deﬁned in this Act: amount, ICA company, imputation credit, imputation credit account, imputation debit, shareholder Compare: 2004 No 35 s ME 5(1)(i), (2)(h) Section OB 41(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 87(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section OB 41(3) heading: substituted (with effect on 1 April 2008), on 7 De- cember 2009, by section 87(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section OB 41(3): substituted (with effect on 1 April 2008), on 7 December 2009, by section 87(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
OB 42 ICA on-market cancellation Debit (1) When an ICA company acquires its shares in an on-market cancellation, it has an imputation debit for an amount calcu- lated using the formula— ASC per share excess × tax rate 1 – tax rate.
Deﬁnitions of items in formula In the formula,— (a) ASC per share excess is the amount distributed on the on-market cancellation that is more than the amount of the available subscribed capital per share calculated under the ordering rule: tax rate is the basic rate of income tax set out in sched- ule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) for the tax year in which the acquisition occurs.
(b) Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 15 (on-market cancellation).

(2) (3) 1932 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 43 (4) (5) Negative result If the formula produces a negative result, the debit is treated as zero.

Debit date The debit date is the day the shares are acquired by the com- pany in the on-market cancellation.
Deﬁned in this Act: amount, available subscribed capital, ICA company, im- putation debit, on-market cancellation, ordering rule, RWT, share Compare: 2004 No 35 s ME 5(1)(c), (2)(c) Section OB 42(1) formula: amended, on 1 April 2008, by section 498(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OB 42(2)(b): substituted, on 1 April 2008, by section 498(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OB 43 ICA breach of imputation ratio (1) (2) Debit An ICA company has an imputation debit for a breach of the benchmark dividend rules in section OB 61(5) for an amount calculated using the formula— (net dividends × imputation ratio) – attached credits.
Deﬁnition of items in formula In the formula,— (a) net dividends is the total amount of all dividends paid by the company during the tax year, excluding the amount of imputation credits and FDP credits attached to the dividends: imputation ratio is the maximum permitted ratio cal- culated under section OA 18(2) (Calculation of maxi- mum permitted ratios) for an imputation credit or, if less, the greatest imputation ratio of dividends paid by the company for the tax year: attached credits is the total amount of all imputation credits attached to dividends paid by the company for the tax year.
(b) (c) (3) Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 16 (breach of imputation ratio).

1933 Part O s OB 44 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) (5) Ratio change declaration A debit under subsection (1) does not arise if the company provides a ratio change declaration under section OB 61(6).

Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, benchmark dividend, dividend, FDP credit, ICA company, imputation credit, imputation debit, imputation ratio, maximum per- mitted ratio, tax year Compare: 2004 No 35 s ME 5(1)(f), (2)(f) OB 44 ICA debit on leaving wholly-owned group (1) (2) (3) Debit An ICA company (company A) has an imputation debit for an amount equal to the amount of an imputation debit that another company (company B) chooses under section OB 13 as a debit to company A’s imputation credit account when company B leaves a wholly-owned group of companies.
Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 17 (debit balance on leaving wholly-owned group).

Debit date The debit date is the date when the company B stops being part of the wholly-owned group.
Deﬁned in this Act: amount, company, ICA company, imputation credit ac- count, imputation debit, wholly-owned group of companies Compare: 2004 No 35 ss ME 5(1)(fb), (2)(fb), ME 9B(2)(a)(i) OB 45 ICA redemption debit Debit An ICA company has an imputation debit for the amount of a redemption debit.
When redemption debit arises A redemption debit arises when— (a) a company that is not an Australian ICA company is— (i) (ii) the manager of a unit trust; or the trustee or manager of a group investment fund; and (1) (2) 1934 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 45 (b) (c) (d) the company derives a dividend on the redemption or cancellation of— (i) (ii) a unit issued by the unit trust; or an interest of an investor in the group investment fund; and the company has acquired the unit or interest in the or- dinary course of its management activities for the unit trust or group investment fund; and the unit or interest had been acquired by the company on the same terms as those offered to the investors in the unit trust or group investment fund.
Calculating amount The debit is for the greater of the amounts described in subsec- tions (4) and (6) calculated for the income year in which the company derived the dividend referred to in subsection (2)(b).

First amount The ﬁrst amount is calculated using the formula— credits attached – imputation debits.
Deﬁnition of items in formula In the formula in subsection (4), — (a) credits attached is the total amount of all imputation credits and FDP credits attached to dividends derived in the circumstances set out in subsection (2) by the company for the income year: imputation debits is the total amount of all imputation debits arising for the income year under— (i) section OB 41 in the company’s imputation (b) (3) (4) (5) credit account; or (ii) section OP 42 (Consolidated ICA debit for loss of shareholder continuity) in the imputation credit account of the consolidated imputation group of which the company is part.
Second amount The second amount is calculated using the formula— (6) 1935 Part O s OB 45 Income Tax Act 2007 Reprinted as at 1 January 2010 Deﬁnition of items in formula In the formula in subsection (6),— (a) total dividends is the total amount of all dividends derived in the circumstances set out in subsection (2), including imputation credits and FDP credits attached to the dividends: taxable income is the taxable income of the company for the income year in which the dividends are derived: tax liability is the company’s income tax liability for the income year: debits is the imputation credits attached to the divi- dends that have been cancelled by an imputation debit arising during the income year under — (i) section OB 41 in the company’s imputation (ii) credit account; or section OP 42 in the imputation credit account of the consolidated imputation group of which the company is part.
Table references The table references are as follows: (a) the imputation debit in subsection (1) is referred to in table O2: imputation debits, row 18 (redemption debit): the imputation debit in subsection (5)(b)(i) is referred to in table O2: imputation debits, row 14 (debit for loss of shareholder continuity): the imputation debit in subsection (5)(b)(ii) is referred to in table O20: imputation debits of consolidated im- putation groups, row 16 (debit for loss of shareholder continuity): the imputation debit in subsection (7)(d)(i) is referred to in table O2: imputation debits, row 14 (debit for loss of shareholder continuity): the imputation debit in subsection (7)(d)(ii) is referred to in table O20: imputation debits of consolidated im- putation groups, row 16 (debit for loss of shareholder continuity).
(b) (c) (d) (b) (c) (d) (e) (7) (8) 1936 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 46 (9) Debit date The debit date is the date on which the company or the group’s nominated company ﬁles the return of income for the income year in which the dividend is derived.
Deﬁned in this Act: amount, Australian ICA company, company, consolidated imputation group, dividend, FDP credit, group investment fund, ICA company, imputation credit, imputation credit account, imputation debit, income, income tax, income tax liability, income year, investor, nominated company, return of income, shareholder, tax, taxable income, trustee, unit trust Compare: 2004 No 35 s ME 41 OB 46 ICA transfer from member fund (1) (2) (3) (4) Debit An ICA company has an imputation debit for an amount cal- culated using the formula— expenditure transferred × tax rate.
Deﬁnition of items in formula In the formula,— (a) expenditure transferred is the amount of expenditure transferred under sections DV 5 to DV 7 (which relate to expenditure related to investment funds) by the com- pany, as a member fund, to a master fund: tax rate is the basic rate of income tax set out in sched- ule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts).
(b) Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 19 (transfer from member fund).

Debit date The debit date is the last day of the tax year corresponding to the income year in which the expenditure is deducted.
Deﬁned in this Act: amount, basic rate, ICA company, imputation debit, master fund, tax year Compare: 2004 No 35 s ME 5(1)(ja), (2)(ia) Section OB 46(2)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
1937 Part O s OB 47 Income Tax Act 2007 Reprinted as at 1 January 2010 OB 47 ICA transfer to policyholder credit account (1) (2) (3) (4) (5) Election An ICA company that is also a policyholder credit account (PCA) company may, for a tax year,— (a) choose to transfer some or all of a credit balance in the company’s imputation credit account to the company’s policyholder credit account; or be treated as choosing to transfer an imputation credit to the policyholder credit account.
(b) Debit and credit A credit balance or credit transferred under this section is— (a) an imputation debit in the company’s imputation credit account; and a policyholder credit under section OJ 3 (PCA transfer from imputation credit account) in the company’s pol- icyholder credit account.

(b) Table references The imputation debit in subsection (2) is referred to in table O2: imputation debits, row 20 (transfer to policyholder credit account).
The policyholder credit in subsection (2) is referred to in table O13: policyholder credits, row 2 (transfer from imputation credit account).

Method of election The company makes the election by recording the balance transferred as— (a) (b) a debit in the company’s imputation credit account; and a credit in the company’s policyholder credit account.
Election for some credits The company must make the election no later than the last day of the tax year for an amount of the credit balance that arises in the following circumstances: (a) the company has adopted a non-standard accounting year; and during the tax year the company derives a dividend that gives rise to a credit in the company’s imputation credit account under— (i) section OB 9 (table O1: imputation credits, row 7 (dividend derived with imputation credit)); or (b) 1938 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 47 (6) (7) (c) (ii) section OB 10 (table O1: imputation credits, row 8 (dividend derived with FDP credit)); and the credit is included in the credit balance because it has not been used, and no loss of shareholder continuity as required by section OA 8 (Shareholder continuity requirements for memorandum accounts) has occurred.
Mandatory transfer for company with non-standard accounting year Despite the absence of an election during the tax year, a company that has adopted a non-standard accounting year is treated as having chosen at the end of the tax year to transfer the credit described in subsection (7) from the imputation credit account to the policyholder credit account.
Credit The company is treated as having made an election for a tax year to the extent to which— (a) (ii) during the tax year, or no later than the end of the ac- counting year corresponding with the tax year, a credit arises under— (i) section OB 4 (table O1: imputation credits row 2 (payment of tax)) for a payment of provisional tax; or section OB 11 (table O1: imputation credits row 9 (payment of FDP)) for a payment of FDP; and during the tax year, the credit has not been cancelled by a later debit arising under— (i) section OB 32 (table O2: imputation debits row 4 (refund of income tax)) for a refund of provi- sional tax paid during the accounting year: section OB 36 (table O2: imputation debits row 8 (refund of FDP)) for a refund of FDP paid dur- ing the accounting year; and (ii) (b) (c) the credit has not been included in a credit balance trans- ferred by an election under subsection (4).
(8) Ordering rule For the purpose of determining under subsection (7)(b) whether a debit has cancelled a credit, debits are treated as cancelling credits in the order in which the credits arise.
1939 Part O s OB 48 Income Tax Act 2007 Reprinted as at 1 January 2010 (9) Credit and debit dates The credit dates and debit dates for the credit balance and credit transferred are— (a) the day of election for the credit balance transferred under subsection (4); and the last day of the tax year for a credit that the com- pany is treated as having chosen under subsection (5) to transfer.
(b) Deﬁned in this Act: accounting year, amount, dividend, FDP, FDP credit, ICA company, imputation credit, imputation credit account, imputation debit, income tax, non-standard accounting year, pay, PCA company, policyholder credit, policyholder credit account, provisional tax, shareholder, tax year Compare: 2004 No 35 ss ME 5(1)(b), (2)(b), ME 7 OB 48 ICA credit balance when Maori authority credit account starts (1) (2) (3) Debit An ICA company has an imputation debit for a credit balance in the company’s imputation credit account immediately be- fore the company becomes a Maori authority.
Table reference The imputation debit in subsection (1) is referred to in table imputation debits, row 21 (credit balance when Maori O2: authority credit account starts).

Debit date The debit date is the day before the company becomes a Maori authority.
Deﬁned in this Act: ICA company, imputation credit account, imputation debit, Maori authority Compare: 2004 No 35 s ME 5(1)(ka), (2)(ja) OB 49 ICA replacement payment by company under share-lending arrangement Debit An ICA company has an imputation debit for the amount of an imputation credit attached under section OB 64 to a replace- ment payment paid by the company under a share-lending ar- rangement.
(1) 1940 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 51 (2) (3) Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 22 (replacement payment under share-lending arrangement).

Debit date The debit date is the day the replacement payment is paid.
Deﬁned in this Act: amount, ICA company, imputation credit, imputation debit, pay, replacement payment, share-lending arrangement Compare: 2004 No 35 s ME 5(1)(ab), (2)(ab) OB 50 ICA returning share transfer (1) (2) (3) Debit An ICA company has an imputation debit for the amount of an imputation credit attached to a dividend paid to the company as a share user in a returning share transfer that is not a share- lending arrangement.
Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 23 (returning share transfer).

Debit date The debit date is the day the dividend is paid.
Deﬁned in this Act: amount, dividend, ICA company, imputation credit, imput- ation debit, pay, returning share transfer, share-lending arrangement, share user Compare: 2004 No 35 s ME 5(1)(ac), (2)(ac) OB 51 ICA credit transfer by company (1) (2) Debit An ICA company has an imputation debit for the amount of an imputation credit attached to a dividend that is paid to the company and shown in a credit transfer notice given by the company.
Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 24 (credit transfer notice).

1941 Part O s OB 52 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Debit date The debit date is the day the dividend is paid.
Deﬁned in this Act: amount, credit transfer notice, dividend, ICA company, imputation credit, imputation debit, pay Compare: 2004 No 35 s ME 5(1)(ad), (2)(ac) OB 52 ICA imputation credit of consolidated imputation group (1) (2) (3) (4) When this section applies This section applies when— (a) (b) an ICA company that is part of a consolidated imput- ation group has a credit in its imputation credit account; and a debit arises in the imputation credit account of the consolidated imputation group that is not cancelled by a credit in the imputation credit account arising before or on the same date as the company’s credit.
Debit The ICA company has an imputation debit for the amount of the imputation credit that is transferred to the imputation credit account of the consolidated imputation group.

Table reference The imputation debit in subsection (2) is referred to in table O2: imputation debits, row 25 (credit of consolidated imput- ation group).

Debit date The debit date is the day on which the imputation credit is recorded in the imputation credit account of the consolidated imputation group.
Deﬁned in this Act: amount, consolidated imputation group, ICA company, imputation credit, imputation credit account, imputation debit Compare: 2004 No 35 s ME 13(3) OB 53 ICA debit on resident’s restricted amalgamation Debit An ICA company has an imputation debit for the amount of a debit described in subsection (3) that arises on or after a resi- dent’s restricted amalgamation in the account of the amalga- mated company under 1 of the sections listed in subsection (3).
(1) 1942 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 53 (2) (3) Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 26 (debit on resident’s restricted amalgamation).
Sections The sections are— (a) (c) (d) (b) section OA 10 (When credits or debits due to amalgam- ating company but not recorded) for imputation debits in the imputation credit account of an amalgamating company: section OA 11 (FDP account on resident’s restricted amalgamation) for FDP debits in the FDP account of an amalgamating company because the amalgamated company does not maintain an FDP account: section OA 12 (CTR account on resident’s restricted amalgamation) for the CTR debits in the CTR account of an amalgamating company because the amalgamated company does not maintain a CTR account: section OA 13 (Policyholder credit account on resi- dent’s restricted amalgamation) for the policyholder debits in the policyholder credit account of an amal- gamating company because the amalgamated company does not maintain a policyholder credit account: section OA 14 (Continuity of shareholding when group companies amalgamate) for imputation debits in the imputation credit account of a consolidated imputation group that ends its existence on the amalgamation: section OA 16 (When FDP account ends on resident’s restricted amalgamation) for FDP debits in the FDP ac- count of a consolidated group because the amalgamated company does not maintain an FDP account: section OA 17 (When policyholder credit account ends on resident’s restricted amalgamation) for the policy- holder debits on the policyholder credit account of a consolidated group because the amalgamated company does not maintain a policyholder credit account.
Deﬁned in this Act: amalgamated company, amalgamating company, amount, consolidated group, consolidated imputation group, CTR account, CTR debit, FDP account, FDP debit, ICA company, imputation credit account, imputation (g) (e) (f) 1943 Part O s OB 54 Income Tax Act 2007 Reprinted as at 1 January 2010 debit, policyholder credit account, policyholder debit, resident’s restricted amalgamation Compare: 2004 No 35 ss ME 29, MG 17, MI 13 OB 54 ICA tax advantage arrangement (1) (2) (3) Debit An ICA company has an imputation debit for the amount of a debit for a tax advantage arrangement determined under sec- tion GB 36 (Reconstruction of imputation arrangements to ob- tain tax advantage).
Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 27 (tax advantage arrangement).

Debit date The debit date is the last day of the tax year in which the debit for the tax advantage arrangement is determined.
Deﬁned in this Act: amount, arrangement, ICA company, imputation debit, tax advantage, tax year Compare: 2004 No 35 s ME 5(1)(j), (2)(i) OB 55 ICA retrospective imputation credit Debit An ICA company has an imputation debit for an imputation credit that is retrospectively attached to a non-cash dividend under section OB 62.

Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 28 (retrospective imputation credit).
Debit date The debit date is the day the dividend is paid.

Deﬁned in this Act: ICA company, imputation credit, imputation debit, non- cash dividend, pay Compare: 2004 No 35 s ME 6(4)(a) (1) (2) (3) 1944 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 58 OB 56 ICA ﬁnal balance (1) (2) (3) Debit An ICA company has an imputation debit for a credit balance in the imputation credit account when the company stops being an ICA company.
Table reference The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 29 (ﬁnal balance).

Debit date The debit date is the day the company stops being an ICA company.

Deﬁned in this Act: ICA company, imputation credit account, imputation debit Compare: 2004 No 35 s ME 5(1)(k), (2)(j) OB 57 ICA refund of NRWT (1) (2) (3) Debit An Australian ICA company has an imputation debit for an amount of a refund of NRWT that gave rise to an imputation credit under section OB 27.
Table references The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 30 (refund of NRWT).

The imput- ation credit in subsection (1) is referred to in table O1: imput- ation credits, row 25 (NRWT withheld).

Debit date The debit date is the day the refund is made.
Deﬁned in this Act: amount, amount of tax, Australian ICA company, imput- ation credit, imputation debit, NRWT Compare: 2004 No 35 s ME 5(1A)(a), (2A) OB 58 ICA refund of amount of tax for schedular payment (1) Debit An Australian ICA company has an imputation debit for the amount of a refund of an amount of tax for a schedular pay- ment that gave rise to an imputation credit under section OB 28.
1945 Part O s OB 59 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Table references The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 31 (refund of amount of tax for schedular payment).

The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 26 (amount of tax for schedular payment).

Debit date The debit date is the day the refund is made.
Deﬁned in this Act: amount, amount of tax, Australian ICA company, imput- ation credit, imputation debit, pay, schedular payment Compare: 2004 No 35 s ME 5(1A)(b), (2A) OB 59 ICA refund of schedular income tax (1) (2) (3) Debit An Australian ICA company has an imputation debit for the amount of a refund of schedular income tax that gave rise to an imputation credit under section OB 29.
Table references The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 32 (refund of schedular income tax).

The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 27 (payment of schedular income tax).

Debit date The debit date is the day the refund is made.
Deﬁned in this Act: amount, Australian ICA company, imputation credit, im- putation debit, pay Compare: 2004 No 35 s ME 5(1A)(c), (2A) Imputation credits attached to dividends OB 60 Imputation credits attached to dividends Attaching imputation credits (1) When an ICA company pays a dividend, it may attach an im- putation credit to the dividend.

Section OB 63 overrides this section.
1946 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 60 (2) (3) (4) (5) (6) (7) Retrospective attachment The ICA company may determine that an imputation credit is retrospectively attached to a dividend in the circumstances described in section OB 62 Imputation ratio for dividend A dividend with an imputation credit attached has an imput- ation ratio calculated using the formula— Deﬁnition of items in formula In the formula in subsection (3),— (a) (b) credit attached is the amount of the imputation credit attached to the dividend: net dividend paid is the amount of the dividend paid, excluding the amount of the imputation credit and FDP credit attached.
Maximum permitted ratio A dividend with an imputation credit attached must not have an imputation ratio that is more than the maximum permitted ratio calculated under section OA 18(2) (Calculation of maxi- mum permitted ratios).

Conversion of AUD dividend A dividend paid in Australian currency by an Australian ICA company must be converted into New Zealand currency, cal- culated using the formula— Australian dollar value × exchange rate.
Deﬁnition of items in formula In the formula in subsection (6),— (a) (b) Australian dollar value is the amount of the dividend in Australian dollars: exchange rate is the close of trading spot exchange rate for the Australian dollar on— (i) the day the dividend is declared if that day is no more than 3 months before the dividend is paid; or 1947 Part O s OB 61 Income Tax Act 2007 Reprinted as at 1 January 2010 (ii) the day the dividend is paid if that day is more than 3 months after the dividend is declared.
Deﬁned in this Act: amount, Australian ICA company, close of trading spot ex- change rate, dividend, FDP credit, ICA company, imputation credit, imputation ratio, income year, maximum permitted ratio, pay, tax year Compare: 2004 No 35 ss ME 1B, ME 6, ME 8(1), (2) OB 61 ICA benchmark dividend rules When this section applies This section applies when an ICA company pays a dividend on more than 1 occasion during a tax year.

Subsection (2) overrides this subsection.


Exclusions This section does not apply to the following dividends: (a) a dividend that is the subject of an election by a statutory producer board under sections OB 73 to OB 75: a dividend that is the subject of an election by a co-op- erative company under sections OB 78 to OB 80: a dividend paid when the company is not an ICA com- pany.

(b) (c) Benchmark dividend The ﬁrst dividend of the tax year is the benchmark dividend.
Same imputation ratio The imputation ratio of a dividend paid after the benchmark dividend must be the same as the imputation ratio of the bench- mark dividend.

Breach of imputation ratio A breach of subsection (4) gives rise to an amount of an imput- ation debit under section OB 43 (table O2: imputation debits, row 16 (breach of imputation ratio)) calculated using the for- mula in section OB 43(1).
Ratio change declaration An ICA company may notify the Commissioner that the divi- dend is not part of an arrangement to obtain a tax advantage by providing a ratio change declaration stating that the dividend is not part of an arrangement to which sections GB 35 and GB 36 (which relate to imputation arrangements to obtain tax advan- tage) apply.
The company must provide the declaration before (1) (2) (3) (4) (5) (6) 1948 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 62 (7) (8) (9) the dividend is paid, or by a later date if the Commissioner al- lows.

For the purposes of this subsection, the dividend must not be part of an arrangement to obtain a tax advantage.

This subsection overrides subsection (5).


Consolidated imputation group [Repealed] [Repealed] Group debit Under section OP 2(2) (When credits and debits arise only in group accounts), a breach of an imputation ratio alternatively gives rise to an imputation debit under section OP 43 (Consoli- dated ICA breach of imputation ratio) (table O20: imputation debits of consolidated imputation groups, row 17 (breach of imputation ratio)) if the company is part of a consolidated im- putation group.
Treatment of group dividends In the application of this section to a consolidated imputation group, a dividend paid between group companies is disre- garded.
Deﬁned in this Act: arrangement, benchmark dividend, Commissioner, com- pany, consolidated imputation group, co-operative company, dividend, ICA company, imputation debit, imputation ratio, notify, pay, statutory producer board, tax advantage, tax year Compare: 2004 No 35 ss ME 8(2), (3), ME 14(2) Section OB 61(7) heading: repealed (with effect on 1 April 2008), on 6 October 2009, pursuant to section 397(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 61(7): repealed (with effect on 1 April 2008), on 6 October 2009, by section 397(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OB 62 Retrospective attachment of imputation credits (1) When this section applies This section applies in relation to a dividend arising from a transfer pricing arrangement or under subpart FL (Emigration of resident companies) when— (a) an ICA company pays a non-cash dividend whose amount is later adjusted under section GC 7 or GC 8 (which relate to transfer pricing arrangements): 1949 Part O s OB 62 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) an emigrating company that was an ICA company im- mediately before the time of emigration and is treated under section FL 2 (Treatment of emigrating companies and their shareholders) as paying a distribution to share- holders.
Imputation credits attached retrospectively The company may attach retrospectively an imputation credit to the dividend or distribution, as applicable.
Limit for ICA company The amount of all imputation credits attached retrospectively by a company referred to in subsection (1)(a) during a tax year must not be more than the lesser of— (a) the credit balance of the company’s imputation credit account at the end of the tax year in which the dividend is paid; or the credit balance of the company’s imputation credit account at the end of each of the tax years in the period that runs from the tax year of payment of the dividend to the tax year in which the credit is attached retrospect- ively under subsection (1).
(b) Limit for emigrating company The amount of all imputation credits attached retrospectively by a company referred to in subsection (1)(b) must be no more than the credit balance of the company’s imputation credit ac- count immediately before the time of emigration.
When subsection (6) applies Subsection (6) applies if— (a) a company provides a company dividend statement and issues a shareholder dividend statement for a non-cash dividend at the time it retrospectively attaches an im- putation credit; and the adjustment under section GC 7 or GC 8 results in a payment of income tax; and the attachment of the imputation credit would otherwise result in a liability for imputation penalty tax.
(b) (c) New credit date The credit date for the imputation credit arising for the pay- ment of the income tax referred to in subsection (5)(b) is the (2) (3) (4) (5) (6) 1950 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 63 (7) (8) (9) day on which the non-cash dividend is paid, and the company is excused a breach of section 69 of the Tax Administration Act 1994 for not ﬁling a correct annual ICA return through the retrospective attachment of an imputation credit.
Statements still required A company that does not meet the requirement of subsection (5)(a) remains liable to— (a) (b) provide a company dividend statement; and issue a shareholder dividend statement for the non-cash dividend and the retrospective attachment of an imput- ation credit.

When subsection (9) applies Subsection (9) applies when an amount of tax paid by an emi- grating company is attributable to income derived before the time of emigration or to the application of subpart FL.
Amount of tax paid by emigrating company The amount of tax referred to in subsection (8) is treated for the purposes of this subpart as paid immediately before the time of emigration if— (a) the company determines to attach an imputation credit to a dividend; and the imputation credit is not less than the amount of tax; and the company notiﬁes the Commissioner when providing the company dividend statement.
(b) (c) Deﬁned in this Act: amount, amount of tax, annual ICA return, arrangement, Commissioner, company dividend statement, dividend, emigrating company, ICA company, imputation credit, imputation credit account, imputation penalty tax, income, income tax, non-cash dividend, notify, pay, shareholder, share- holder dividend statement, tax year, time of emigration Compare: 2004 No 35 s ME 6 OB 63 Australian dividends (1) No credits attached Despite section OB 60(1), an ICA company must not attach an imputation credit to a dividend if— (a) the Income Tax Assessment Act 1997 (Aust) applies to the payment of the dividend by the company; and 1951 Part O s OB 64 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (b) (c) the dividend is paid in relation to a share that is, or forms part of, a debt interest under that Act; and the payment of the dividend is included in the com- pany’s return of income to the Australian Federal Com- missioner of Taxation.
Exclusion: groups of companies Subsection (1) does not apply in relation to a share issued be- fore 21 July 2005 if, when the dividend is paid, the shareholder and the ICA company— (a) (b) are not part of the same group of companies: are part of the same wholly-owned group of companies and not resident in New Zealand.
Exclusion: reasons for acquisition of shares Subsection (1) does not apply in relation to a share issued before 21 July 2005 if— (a) the shareholder and the ICA company are part of the same group of companies; and the shareholder acquired the share— (i) (ii) as part of a sharebroking business: as an investment held by the shareholder as part of an insurance business: as security for a loan given as part of a business of lending money: as a trustee for a beneﬁciary who is not a com- pany that is part of the same group of companies as the shareholder: for a reason that does not include the fact that the shareholder and the ICA company were part of the same group of companies.
(iii) (iv) (v) (b) Deﬁned in this Act: business, company, dividend, group of companies, ICA company, imputation credit, pay, resident in New Zealand, share, shareholder, trustee, wholly-owned group of companies Compare: 2004 No 35 s ME 6(1B)–(1D) OB 64 Replacement payments Attaching credits On making a replacement payment, a share user under a share- lending arrangement may attach an imputation credit to the payment.
(1) 1952 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 66 (2) Amount of credit The amount of the imputation credit must be equal to or less than the amount of any imputation credit attached to a dividend relating to the replacement payment that is received by the share user before the replacement payment is made.
Deﬁned in this Act: amount, dividend, imputation credit, pay, replacement pay- ment, share-lending arrangement, share user Compare: 2004 No 35 s ME 6B Further income tax OB 65 Further income tax for ICA closing debit balance (1) (2) (3) Liability An ICA company is liable to pay further income tax for a debit balance in the company’s imputation credit account at the end of a tax year.
Exclusion An imputation debit arising under section OB 46 (table O2: imputation debits, row 19 (transfer from member fund)) is dis- regarded when determining under subsection (1) if the com- pany has a debit balance at the end of a tax year.

Due date The company must pay the further income tax to the Commis- sioner no later than 20 June following the end of the tax year.
Deﬁned in this Act: Commissioner, company, further income tax, ICA com- pany, imputation credit account, imputation debit, pay, tax year Compare: 2004 No 35 s ME 9(1), (1A), (2) OB 66 Further income tax when company stops being ICA company (1) (2) Liability An ICA company is liable to pay further income tax for a debit balance in the company’s imputation credit account when the company stops being an ICA company.
Due date The company must pay the further income tax to the Commis- sioner— (a) by the day the company stops being an ICA company; or 1953 Part O s OB 67 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (b) for a company that is no longer an ICA company be- cause it becomes a portfolio investment entity, by the end of the tax year in which it stops being an ICA com- pany.
Paramount section A company that stops being an ICA company on the last day of a tax year is liable to pay further income tax under this section and not under section OB 65.

Deﬁned in this Act: Commissioner, company, further income tax, ICA com- pany, imputation credit account, pay, portfolio investment entity, tax year Compare: 2004 No 35 s ME 9(3) Section OB 66(2): substituted, on 1 April 2008, by section 499(1) of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OB 66 list of deﬁned terms portfolio investment entity: inserted, on 1 April 2008, by section 499(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OB 67 Reduction of further income tax Debit at previous year-end An ICA company’s liability for further income tax under sec- tions OB 65 and OB 66 may be reduced under subsection (2) if— (a) a debit balance existed in the company’s imputation credit account at the end of a tax year; and the credits that arise in the account in the following tax year totals less than the debit balance; and the company notiﬁes the Commissioner.
(b) (c) Amount of reduction The liability is reduced by the amount that is the debit balance for the tax year less the total amount of credits for the follow- ing tax year.
Qualifying companies The liability of an ICA company that is a qualifying company for further income tax under sections OB 65 and OB 66 may be reduced under subsection (4) if an imputation debit arises under section OB 32 (table O2: imputation debits, row 4 (re- fund of income tax)) in the company’s imputation credit ac- count before the end of the tax year for which the liability arises.
(1) (2) (3) 1954 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 68 (4) (5) Amount of reduction The liability of the qualifying company for further income tax at the end of the tax year referred to in subsection (3) is reduced by an amount calculated using the formula— refunds – credits.
Deﬁnition of items in formula In the formula,— (a) refunds is the total amount of all refunds of income tax paid to the company before the debit balance cre- ating the liability for further income tax referred to in subsection (3) arises: credits is the total amount of all credits to the com- pany’s imputation credit account for the period that runs from the tax year in which the ﬁrst refund was received to the time the calculation is made.
(b) Deﬁned in this Act: amount, Commissioner, further income tax, ICA company, imputation credit account, imputation debit, imputation rules, income tax, no- tify, pay, qualifying company, tax year Compare: 2004 No 35 s ME 9(7)–(9) OB 68 Income tax paid satisfying liability for further income tax (1) (2) (3) Election On meeting the requirements of subsection (2), an ICA com- pany that is liable for further income tax may choose to satisfy the liability through a payment of income tax.
Requirements The company must pay the income tax— (a) after the end of the tax year in which the relevant debit balance arises; and for an income year corresponding to the tax year in which the company is an ICA company.

(b) Payment credited The payment of income tax satisﬁes the company’s liability to pay further income tax.
1955 Part O s OB 69 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) When treated as paid The further income tax is treated as paid on the date on which the Commissioner receives the payment of income tax.
Deﬁned in this Act: Commissioner, further income tax, ICA company, income tax, income year, pay, tax year Compare: 2004 No 35 s ME 9(5A), (8), (9) OB 69 Further income tax paid satisfying liability for income tax Election An ICA company that pays further income tax may choose to treat the payment as satisfying a liability of the company to pay income tax or provisional tax.
ICA company status The liability for income tax or provisional tax referred to in subsection (1) must be for an income year corresponding to a tax year in which the company is an ICA company.

Alternative for consolidated imputation group A company that is part of a consolidated imputation group may choose that the payment under subsection (1) satisﬁes a group liability for income tax or provisional tax that arises at or after the time of payment.
When treated as paid The liability for income tax or provisional tax is treated as paid on the day on which the further income tax is paid.

Australian ICA company An Australian ICA company may choose to convert a payment of further income tax into a tax loss of an amount calculated under subsection (7).

Subsection (6) overrides this subsection.


Requirement The election under subsection (5) may be made only if no possibility exists that the further income tax can be credited against a future income tax liability of the company.
Tax loss For the purposes of subsection (5), the amount of the tax loss for the payment of further income tax is calculated using the formula— (1) (2) (3) (4) (5) (6) (7) 1956 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 70 (8) Deﬁnition of items in formula In the formula,— (a) (b) further income tax paid is the amount of further in- come tax paid that is not credited against an income tax liability: tax rate is the basic rate of income tax set out in sched- ule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) at the time the further income tax is paid.
(9) Beneﬁt of the loss For the purposes of subsection (5), the company may choose that the tax loss is attributed to itself or to another company that is part of the same wholly-owned group of companies.

When loss is attributed (10) The tax loss referred to in subsection (5) is a loss for the in- come year corresponding to the tax year in which the company paid the further income tax.
Deﬁned in this Act: amount, Australian ICA company, basic rate, consolidated imputation group, further income tax, ICA company, income tax, income tax liability, income year, pay, provisional tax, tax loss, tax year, wholly-owned group of companies Compare: 2004 No 35 ss ME 9(5), (5B), ME 13(6) Section OB 69(8)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OB 70 Application of other provisions When it is appropriate for the purposes of this section, the other sections of this Act and the Tax Administration Act 1994— (a) apply to further income tax as if they addressed further income tax and not income tax; and apply, modiﬁed as necessary, to ensure their application to further income tax rather than income tax; and do not override the imputation rules or section 101 of the Tax Administration Act 1994.
(b) (c) Deﬁned in this Act: further income tax, imputation rules, income tax Compare: 2004 No 35 s ME 9(6) 1957 Part O s OB 71 Income Tax Act 2007 Reprinted as at 1 January 2010 Imputation additional tax OB 71 Imputation additional tax on leaving wholly-owned group (1) (2) (3) (4) When this section applies This section applies in a tax year when— (a) a company (company A) stops being part of a wholly- owned group of companies because of a change in the ultimate owner of the company; and [Repealed] the loss balance carried forward from the previous tax year for companies in the group is more than $1,000,000.
(b) (c) Election to pay imputation additional tax At the time company A stops being part of the wholly-owned group, it may choose to reduce or eliminate the debit balance by paying imputation additional tax of an amount no greater than the debit balance but, in dealing with the liability, it may transfer some or all of the debit balance under subsection (3) or choose to use its excess entitlement under subsection (4), or a combination of both.
Debit balance Company A may choose to transfer under section OB 44 some or all of a debit balance in the company’s imputation credit account to another company (company B) in the same wholly- owned group.

An imputation additional tax liability remains for the amount of the debit balance that is not transferred.
Payment of tax Company A may choose to use the amount of the excess en- titlement described in subsection (5) as follows: (a) company A may choose to treat company B as having paid provisional tax or income tax but only to the extent to which the amount is no more than the excess tax payment for company A when company A has an excess entitlement: company A may choose to use the amount of the excess entitlement under subsection (2) against the liability for imputation additional tax but only to the extent to which (b) 1958 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 71 the amount is no more than the amount referred to in paragraph (a).
(5) (6) (7) (8) (9) Amount of excess entitlement Company A’s excess entitlement at the time it stops being part of the wholly-owned group is 1 of the following amounts: (a) zero, if the credit balance of its imputation credit ac- count at the time is equal to or more than— (i) (ii) the amount in the tax pooling account provided by or for the beneﬁt of company A that is more than its liability to pay income tax or provisional tax at the time; or the entitlement company A would have to a re- fund under sections RM 2, and RM 4 to RM 6 (which relate to refunds of excess tax) as if sec- tions RM 13 to RM 17 (which relate to limits on refunds) did not apply; or (b) (c) the total of the amounts referred to in paragraph (a)(i) and (ii) if no credit balance exists at the time; or the excess of the total of the amounts referred to in para- graph (a)(i) and (ii) over the credit balance, if paragraph (b) does not apply.
Due date If company A chooses to pay imputation additional tax under subsection (2), it must pay the amount to the Commissioner no later than the 20th day of the month following the month in which company A stops being part of the group.

Joint liability Company A and all companies in the group are jointly liable for a payment of imputation additional tax under subsection (6).

A payment of imputation additional tax does not satisfy any other liability of company A or the group.
Payment by excess tax Company A, or another company in the wholly-owned group, may choose to apply an excess tax payment to satisfy company A’s liability.

Form of election An election under this section must follow the form of an elec- tion under section OB 13(5).
However, if subsections (3) or 1959 Part O s OB 72 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) apply to transfer a debit or treat an amount of tax as having been paid, company A must also provide a notice of agree- ment from company B in relation to the amount of excess tax payment.
Deﬁned in this Act: amount, Commissioner, company, excess tax payment, imputation additional tax, imputation credit account, income tax, income tax liability, pay, provisional tax, tax loss, tax pooling account, tax year, ultimate owner, wholly-owned group of companies Compare: 2004 No 35 s ME 9B Section OB 71(1)(b): repealed (with effect on 1 April 2008), on 6 October 2009, by section 398(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 71(4)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 398(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OB 71(5)(c): substituted (with effect on 1 April 2008), on 6 October 2009, by section 398(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OB 71(9): amended (with effect on 1 April 2008), on 6 October 2009, by section 398(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OB 72 Imputation additional tax on joining wholly-owned group Liability An ICA company to which subsection (2) applies may be li- able for imputation additional tax under— (a) subsection (3) as the company’s ﬁrst liability under this section; or subsection (5) as the company’s second liability under this section.
(b) Liable company The company is 1 to which all of the following apply: (a) the company is or was recently part of a wholly-owned group of companies (the former group); and the company has or will soon join a different wholly- owned group of companies (the new group); and the former group has a loss balance carried forward from an earlier tax year of more than $1,000,000 for the tax year before the income year corresponding to the tax year in which the company changes groups.
(b) (c) (1) (2) 1960 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 72 (3) (4) (5) (6) First liability The company is liable for imputation additional tax if, at a particular time,— (a) a debit balance exists in the company’s imputation credit account; and an imputation debit arose when the company was part of the former group; and the imputation additional tax liability of the company has not been paid under section OB 71 by the company or another company in the former group.
(b) (c) Amount of liability The amount of the imputation additional tax liability under subsection (3) is equal to the amount of the imputation debit at the time the company becomes part of the new group.

Second liability The company is liable for an amount of imputation additional tax equal to the excess entitlement determined under subsec- tion (6).
Excess entitlement The company’s excess entitlement at a particular time is 1 of the following amounts: (a) zero, if the credit balance of the company’s imputation credit account at the time is equal to or more than— (i) the amount in the tax pooling account provided by or for the beneﬁt of the company that is more than the company’s liability to pay income tax or provisional tax at the time; or the company’s entitlement to a refund under sec- tions RM 2, and RM 4 to RM 6 (which relate to refunds of excess tax); or (ii) (b) (c) the total of the amounts referred to in paragraph (a)(i) and (ii) if no credit balance exists at the time; or the excess of the credit balance over the total of the amounts referred to in paragraph (a)(i) and (ii), if para- graph (b) does not apply.
(7) Due date The imputation additional tax must be paid to the Commis- sioner no later than the 20th day of the month following the 1961 Part O s OB 73 Income Tax Act 2007 Reprinted as at 1 January 2010 (8) (9) month in which the company stops being part of the former group.

Joint liability The company and all companies in the new group are jointly liable for the imputation additional tax.

A payment of imput- ation additional tax does not satisfy any other liability of the company or the new group.
Payment by excess tax For a liability under subsections (3) and (5), the company or another company in the new group may choose to satisfy the liability by applying an excess tax payment in discharging it.
Deﬁned in this Act: amount, Commissioner, company, excess tax payment, ICA company, imputation additional tax, imputation credit account, imputation debit, income tax liability, income year, pay, provisional tax, tax loss, tax pool- ing account, tax year, wholly-owned group of companies Compare: 2004 No 35 s ME 9C Distributions of statutory producer boards and co-operative companies OB 73 Statutory producer boards attaching imputation credits to cash distributions Election On meeting the requirements of subsection (2), a statutory pro- ducer board that is an ICA company may choose, for an in- come year, to attach an imputation credit to a cash distribution paid to a member of the producer board.
Requirements The producer board may make an election under subsection (1) if— (a) the distribution is made to all persons who were mem- bers of the board at a time in the income year; and the board proposes to pay the distribution based on 1 of the factors set out in subsection (3); and the board would, in the absence of this section, have a deduction for some or all of the distribution, whether as an association rebate under subpart HE (Mutual associ- ations) or under some other provision of this Act.
(b) (c) (1) (2) 1962 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 73 (3) (4) (5) (6) (7) Methods The amount of the distribution must be based on 1 of the fol- lowing methods of determination, as applicable, for an income year: (a) all payments for a member’s produce transactions dur- ing the income year as a proportion of total payments for all members’ produce transactions during the income year; or all levies payable by a member for the income year as a proportion of total levies payable by members for the income year; or another method of determination approved by the Com- missioner.
(b) (c) Total credits attached The total amount of imputation credit attached to the distribu- tion is calculated using the formula— Deﬁnition of items in formula In the formula in subsection (4),— (a) (b) total net dividend is the total amount of the distribu- tion excluding the amount of imputation credit: tax rate is the basic rate of income tax set out in sched- ule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) for the income year.
Member’s credits The amount of a member’s share of an imputation credit at- tached under subsection (4) is calculated using the formula— Deﬁnition of items in formula In the formula in subsection (6),— (a) member’s distribution is the amount of the member’s share of the distribution excluding the amount of imput- ation credit: 1963 Part O s OB 74 Income Tax Act 2007 Reprinted as at 1 January 2010 (8) (9) (b) (c) total distribution is the amount of the total distribution paid excluding the amount of imputation credit: total imputation credit attached is total amount of imputation credit attached to the distribution calculated under subsection (4).
When producer board chooses not to have deduction If a producer board chooses to treat a distribution as a dividend, it is denied a deduction for the amount of the distribution under section DV 18 (Statutory producer boards and co-operative companies).

Relationship with section OZ 15 Section OZ 15 (Attaching imputation credits and notional dis- tributions: modifying amounts) may apply to modify subsec- tion (4).
Deﬁned in this Act: amount, association rebate, basic rate, Commissioner, de- duction, dividend, ICA company, imputation credit, income tax, income year, levy, member, pay, produce transactions, statutory producer board Compare: 2004 No 35 ss ME 30, ME 31 Section OB 73(5)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OB 73(9) heading: added, on 1 April 2008, by section 500 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OB 73(9): added, on 1 April 2008, by section 500 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
OB 74 Statutory producer boards attaching imputation credits to notional distributions Election A statutory producer board that is an ICA company may choose, for an income year, to attach an imputation credit to a notional distribution, as a result of which a member derives a dividend of an amount calculated under section OB 75(2).

Subsections (2) and (8) override this subsection.


All members A statutory producer board may make an election under sub- section (1) only if the distribution is made to all persons who were members of the producer board at a time in the income year.
(1) (2) 1964 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 74 (3) (4) (5) (6) (7) Methods The producer board may determine that the amount of an im- putation credit attached to a notional distribution is based on— produce transactions, and calculated under subsection (a) (5) for each member; or (b) members’ levies, and calculated under subsection (7) (c) (d) for each member; or a combination of paragraphs (a) and (b); or some other method of determination approved by the Commissioner.
Produce transactions The amount of an imputation credit attached to a member’s distribution that is based on produce transactions is calculated using the formula— Deﬁnition of items in formula In the formula in subsection (4),— (a) member’s payments is the total amount of all pay- ments to or by a member for the member’s produce transactions during the income year: total payments is all payments to or by all members for produce transactions during the income year: credit attached is the amount of imputation credit at- tached to the distribution.
(b) (c) Members’ levies An imputation credit attached to a member’s distribution that is based on members’ levies is calculated using the formula— Deﬁnition of items in formula In the formula in subsection (6),— (a) member’s levies is the total amount of all levies payable by a member to the producer board for the income year: total levies is total amount of all levies payable by all members to the producer board for the income year: (b) 1965 Part O s OB 75 Income Tax Act 2007 Reprinted as at 1 January 2010 (8) (c) credit attached is the amount of imputation credit at- tached to the distribution.
Commissioner’s determination The Commissioner may apply subsections (4) to (7) to deter- mine the amount of the imputation credit to be treated as at- tached to a member’s distribution if the Commissioner con- siders that the producer board’s application of subsections (3) to (7) does not result in a fair and reasonable allocation of an amount of imputation credit to a member having regard to— (a) (b) (c) Deﬁned in this Act: amount, Commissioner, dividend, ICA company, imput- ation credit, income year, levy, member, pay, produce transactions, statutory producer board Compare: 2004 No 35 s ME 32 the produce transactions of the producer board; and the levies payable to the producer board; and any other relevant factor.
OB 75 Statutory producer boards’ notional distributions that are dividends (1) Dividend derived A notional distribution to which section OB 74 applies that has an imputation credit attached is a dividend under section CD 13 (Notional distributions of producer boards and co-operative companies) derived by a member.
Calculation of amount The amount of the dividend is calculated using the formula— (2) Deﬁnitions of items in formula In the formula,— (a) (b) credit attached is the amount of imputation credit at- tached to the member’s distribution: tax rate is the basic rate of income tax for companies set out in schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) for the income year.
(3) 1966 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 76 (4) (5) (6) When derived The member derives the dividend on the date the statutory pro- ducer board chooses under section OB 74 to make a notional distribution.
Returns and information For the purposes of this section, the producer board must— (a) include the details of the dividend with the return of in- come ﬁled for the tax year corresponding to the income year in relation to which the distribution was made; and retain relevant information to enable the Commissioner to determine whether a later distribution is not a divi- dend under section CD 26(3) or CD 33(1) (which relate to capital distributions on liquidation or emigration and payments that correspond to notional distributions).
(b) Relationship with section OZ 15 Section OZ 15 (Attaching imputation credits and notional dis- tributions: modifying amounts) may apply to modify subsec- tion (2).
Deﬁned in this Act: amount, basic rate, Commissioner, company, dividend, imputation credit, income tax, income year, member, pay, return of income, statutory producer board, tax year Compare: 2004 No 35 s ME 33 Section OB 75(3)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OB 75(6) heading: added, on 1 April 2008, by section 501 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OB 75(6): added, on 1 April 2008, by section 501 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

OB 76 Statutory producer boards attaching FDP credits (1) (2) FDP credits attached A statutory producer board that is an FDPA company may choose, for an income year, to attach an FDP credit to a cash distribution or a notional distribution.

An FDP credit may be attached in conjunction with an imputation credit.
Application of provisions Sections OB 73 to OB 75 and OB 77 apply, modiﬁed as ne- cessary, to the producer board, the distribution, and the FDP credit.

1967 Part O s OB 77 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Both credits at once A producer board may choose to attach both an imputation credit and an FDP credit as part of 1 distribution.
Deﬁned in this Act: FDP credit, FDPA company, imputation credit, income year, statutory producer board Compare: 2004 No 35 s ME 34 OB 77 When and how statutory producer board makes election (1) (2) Timing of election A statutory producer board may make an election under sec- tion OB 73, OB 74, or OB 76 in relation to a distribution either— (a) after the income year in relation to which the distribu- tion is made; but no later than 6 months after the end of the income year in relation to which the distribution is made.
(b) Notice A producer board must notify the Commissioner of an election referred to in subsection (1) no later than the time allowed for the statutory producer board to ﬁle a return of income for the tax year corresponding to the income year in relation to which the distribution is made.
Deﬁned in this Act: Commissioner, dividend, income year, return of income, statutory producer board, tax year Compare: 2004 No 35 s ME 30(3), (4) OB 78 Co-operative companies attaching imputation credits to cash distributions Election On meeting the requirements of subsection (2), a co-operative company that is an ICA company may choose, for an income year, to attach an imputation credit to a cash distribution paid to the company’s shareholders.
Requirements A co-operative company may make an election under subsec- tion (1) if— (1) (2) 1968 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 78 (a) (b) (c) (d) the distribution is made to all persons who were share- holders of the company at a time during the income year; and the distribution is based on the proportion for the in- come year in which the payments to or by a shareholder for their produce transactions are of total payments to or by all shareholders for all produce transactions; and the company would, in the absence of this section, have a deduction for some or all of the distribution, whether as an association rebate under subpart HE (Mutual as- sociations) or some other provision of this Act; and no other election for a cash distribution is made for the income year.
Total credit attached The total amount of imputation credit attached to the distribu- tion is calculated using the formula— Deﬁnition of items in formula In the formula in subsection (3),— (a) (b) total net dividend is the total amount of the distribu- tion excluding the amount of imputation credit: tax rate is the basic rate of income tax set out in sched- ule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) for the income year.
Shareholder’s credit The amount of a shareholder’s share of the imputation credit attached as described in subsection (3) is calculated using the formula— Deﬁnition of items in formula In the formula in subsection (5),— (a) shareholder’s distribution is the amount that is the shareholder’s share of the distribution, excluding the amount of imputation credit: 1969 (3) (4) (5) (6) Part O s OB 79 Income Tax Act 2007 Reprinted as at 1 January 2010 (7) (8) (b) (c) total distribution is the amount of the total distribution paid, excluding the amount of imputation credit: total imputation credit attached is the total amount of imputation credit attached to the distribution calculated under subsection (3).
When co-operative company chooses not to have deduction If a co-operative company chooses to treat a distribution as a dividend, it is denied a deduction under section DV 18 (Statu- tory producer boards and co-operative companies).

The com- pany must notify the Commissioner of an election under this subsection under section OB 82(3) for the election to be ef- fective.
Relationship with section OZ 15 Section OZ 15 (Attaching imputation credits and notional dis- tributions: modifying amounts) may apply to modify subsec- tion (3).
Deﬁned in this Act: amount, association rebate, basic rate, Commissioner, co-operative company, deduction, dividend, ICA company, imputation credit, income tax, income year, Maori authority, notify, pay, produce transactions, shareholder Compare: 2004 No 35 ss ME 35, ME 36 Section OB 78(4)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OB 78(8) heading: added, on 1 April 2008, by section 502 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OB 78(8): added, on 1 April 2008, by section 502 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
OB 79 Co-operative companies attaching imputation credits to notional distributions Election On meeting the requirements of subsection (2), a co-operative company that is an ICA company may choose, for an income year, to attach an imputation credit to a notional distribution, as a result of which a member derives a dividend of an amount calculated under section OB 80.
Requirements A co-operative company may make an election under subsec- tion (1) if— (1) (2) 1970 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 80 (3) (4) (a) (b) the distribution is made to all persons who were share- holders of the company at a time during the income year; and no other election to pay a notional distribution is made for the income year.
Shareholder’s credits The amount of a shareholder’s share of an imputation credit attached to a notional distribution is calculated using the for- mula— Deﬁnition of items in formula In the formula,— (a) produce payments is the amount of all payments to or by the shareholder for the shareholder’s produce trans- actions during the income year: total payments is the amount of all payments to or by shareholders for produce transactions during the in- come year: credit attached is the amount of imputation credit at- tached to the distribution.
(b) (c) Deﬁned in this Act: amount, co-operative company, dividend, ICA company, imputation credit, income year, member, pay, produce transactions, shareholder Compare: 2004 No 35 s ME 37 OB 80 Co-operative companies’ notional distributions that are dividends (1) (2) Dividends A notional distribution referred to in section OB 79 that has an imputation credit attached is a dividend under section CD 13 (Notional distributions of producer boards and co-opera- tive companies) derived by a shareholder of the co-operative company.
Amount The amount of a shareholder’s dividend is calculated using the formula— 1971 Part O s OB 81 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) Deﬁnition of items in formula In the formula,— (a) (b) credit attached is the amount of imputation credit at- tached to the shareholder’s distribution: tax rate is the basic rate of income tax set out in sched- ule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) for the income year.
When derived The shareholder derives the dividend on the date the co-opera- tive company chooses under section OB 79 to make a notional distribution.

Relationship with section OZ 15 Section OZ 15 (Attaching imputation credits and notional dis- tributions: modifying amounts) may apply to modify subsec- tion (2).
Deﬁned in this Act: amount, basic rate, co-operative company, dividend, im- putation credit, income tax, income year, shareholder Compare: 2004 No 35 s ME 38 Section OB 80(3)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OB 80(5) heading: added, on 1 April 2008, by section 503 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OB 80(5): added, on 1 April 2008, by section 503 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

OB 81 Co-operative companies attaching FDP credits Election A co-operative company that is an FDPA company may choose, for an income year, to attach an FDP credit to a cash distribution.

The FDP credit may be attached in conjunction with an imputation credit.
Application of provisions Sections OB 78 to OB 80 and section 64 of the Tax Administration Act 1994 apply, modiﬁed as necessary, to the co-operative company, the distribution, and the FDP credit.

(1) (2) 1972 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OB 82 (3) Both credits at once A co-operative company may choose to attach both an imput- ation credit and an FDP credit as part of 1 distribution.
Deﬁned in this Act: co-operative company, FDP credit, FDPA company, im- putation credit, income year Compare: 2004 No 35 s ME 39 OB 82 When and how co-operative company makes election (1) (2) (3) One a year A co-operative company may make an election under section OB 78, OB 79, or OB 81 in relation to a distribution for— (a) (b) only 1 cash distribution during the income year: only 1 notional distribution during the income year.
Timing A co-operative company may make an election referred to in subsection (1)— (a) after the income year in relation to which the distribu- tion is made; but no later than 6 months after the end of the income year in relation to which the distribution is made.
(b) Notice A co-operative company must notify the Commissioner of an election referred to in subsection (1)(a) no later than the time allowed for the company to ﬁle a return of income for the tax year corresponding to the income year in relation to which the distribution is made.
Deﬁned in this Act: Commissioner, co-operative company, income year, notify, return of income, tax year Compare: 2004 No 35 s ME 35 Tables of credits and debits in memorandum accounts How to use these tables Each row of a table describes— (a) the credits or debits that may arise in a memorandum account during a tax year; and 1973 Part O s OB 82 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the credit date or debit date when the credit or debit arises.
A more detailed description of the credits or debits is contained in the section noted in the last column.
Table O1—imputation credits Row Imputation credit Credit date Opening credit balance 1 April Provisional tax and income tax paid day of payment Deposit into tax pooling account day of payment Transfer from tax pooling account day of credit Payment of further income tax day of payment 5B Payment of qualifying company election tax day of payment 5C Tax credit for research and development expenditure day return ﬁled Further deﬁned section OA 7 section OB 4 section OB 5 section OB 6 section OB 7 section OB 7B section OB 7C.
6 7 Amount of tax withheld for resident passive income day on which amount is withheld section OB 8 Imputation credit attached to dividend derived day on which dividend is paid section OB 9 7B Attributed PIE income with imputation credit day of attribution section OB 9B 1974 Reprinted as at 1 January 2010 Table O1—continued Income Tax Act 2007 Part O s OB 82 Row Imputation credit Credit date 8 9 10 11 FDP credit attached to dividend derived when not FDPA company day on which dividend is paid [Repealed] Transfer from FDP account day of payment Transfer of debt balance when company leaves wholly-owned group day on which company leaves group Further deﬁned section OB 10 section OB 12 section OB 13 12 Additional income tax payable when company leaves wholly-owned group 13 Additional income tax when company joins wholly-owned group day of payment section OB 14 day of payment section OB 15 14 Attribution for personal 31 March services if company is not qualifying company 15 16 17 Transfer from policyholder credit account Transfer from ASC account Transfer from master fund by company day of transfer day of transfer day of transfer section OB 16 section OB 17 section OB 18 section OB 19 1975 Part O s OB 82 Income Tax Act 2007 Reprinted as at 1 January 2010 Table O1—continued Row Imputation credit Credit date Further deﬁned 18 Maori authority credit attached to day of distribution 19 Transfer of balance of Maori authority credit account 20 Replacement money paid under share-lending arrangement day of distribution
 section OB 20 day of transfer section OB 21 day of payment section OB 22 21 22 Imputation credit shown in credit transfer notice day on which notice is given section OB 23 Imputation credit, FDP credit, or policyholder credit on resident’s restricted amalgamation credit date in account of amalgamat- ing company section OB 24 23 Reversal of debt for tax advantage arrangement debit date of debit section OB 25 day of refund or credit section OB 26 24 Eliminating debit for loss of shareholder continuity cancelling tax pooling account deposit that is refunded or credited 1976 Reprinted as at 1 January 2010 Table O1—continued Income Tax Act 2007 Part O s OB 82 Row Imputation credit Credit date Further deﬁned section OB 27 day on which amount is withheld day on which amount is withheld section OB 28 day of payment section OB 29 25 Amount of tax withheld by Australian ICA company for non-resident passive inncome 26 Amount of tax withheld from schedular payment to Australian ICA company 27 Schedular income tax paid by Australian ICA company Table O1 row 5B: inserted, on 1 April 2008, by section 497 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Table O1 row 5C: inserted, on 1 April 2008, by section 497 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Table O1 row 7B: substituted (with effect on 1 April 2009), on 6 October 2009, by section 399(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O1 row 7B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 399(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Table O1 row 9: repealed (with effect on 30 June 2009), on 6 October 2009, by section 399(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O1 row 14: amended (with effect on 1 April 2008), on 6 October 2009, by section 399(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O2—imputation debits Row Imputation debit Debit date 1 Opening debt balance 1 April Further deﬁned section OA 7 1977 Part O s OB 82 Income Tax Act 2007 Reprinted as at 1 January 2010 Table O2—continued Row Imputation debit Debit date Further deﬁned Imputation credit attached to dividend paid day of payment section OB 30 Allocation of provisional tax day of notice of allocation section OB 31 Refund of income tax day of refund Overpaid income tax applied to meet another tax liability day of application Refund from tax pooling account day of refund Transfer of entitlement to another person in tax pooling account set out in section OB 35 Refund of FDP when not FDPA company day of refund Transfer, refund, or use of tax credit day of transfer, refund, or use section OB 32 section OB 33 section OB 34 section OB 35 section OB 36 section OB 37 10 Overpaid FDP applied to satisfy liability when not FDPA company 11 Overpaid income tax or FDP applied to satisfy pre-imputation income tax when not FDPA company day of application section OB 38 day of application section OZ 3 1978 Reprinted as at 1 January 2010 Table O2—continued Income Tax Act 2007 Part O s OB 82 Row Imputation debit Debit date 12 [Repealed] 13 Attribution for personal 31 March service Further deﬁned section OB 40 14 Debit for loss of shareholder continuity time of loss of continuity section OB 41 15 Debit for on-market cancellation 16 Debit for breach of imputation ratio day of acquisition 31 march 17 Transfer for debit balance when
 company leaves wholly-owned group day on which company leaves group 18 Redemption debit for unit trust or group investment fund for income year day on which return of income for income year is ﬁled 31 March Transfer from member fund to master fund 19 20 Transfer to company’s policyholder credit account set out in section OB 47 21 Credit balance when Maori authority credit account starts day of becoming Maori authority section OB 42 section OB 43 section OB 44 section OB 45 section OB 46 section OB 47 section OB
 48 1979 Part O s OB 82 Income Tax Act 2007 Reprinted as at 1 January 2010 Table O2—continued Row Imputation debit Debit date Further deﬁned 22 Credit attached to replacement payment paid by company under share-lending arrangement 23 Credit attached to dividend paid to company shown in returning share transfer 24 Credit attached to dividend paid to company shown in credit transfer notice 25 Credit that is also credit to imputation credit account of consolidated imputation group day of payment section OB 49 day of payment section OB 50 day of payment section OB 51 credit date for imputation credit section OB 52 26 Imputation debit, FDP debit, or policyholder debit in account of amalgamating company debit date in account of amalgamat- ing company 27 Debit for tax advantage arrangement 28 Retrospective attachment of imputation credit to non-cash dividend 1980 last day of tax year in which tax arrangement began day of payment of dividend section OB 53 section OB 54 section OB 55 Reprinted as at 1 January 2010 Table O2—continued Income Tax Act 2007 Part O s OB 82 Row Imputation debit Debit date Further deﬁned 29 Final balance when ICA company status ends 30 Refund of amount of tax for non-resident passive income to Australian ICA company day of cessation section OB 56 day of refund section OB 57 31 Refund of amount day of refund section OB 58 of tax for schedular payment to Australian ICA company 32 Refund of schedular income tax to Australian ICA company day of refund
 section OB 59 Table O2 row 9: substituted (with effect on 1 April 2008), on 6 October 2009, by section 400(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O2 row 12: repealed (with effect on 30 June 2009), on 6 October 2009, by section 400(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Table O2 row 14: amended (with effect on 1 April 2008), on 7 December 2009, by section 88 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
1981 Part O s OC 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Subpart OC—Foreign dividend payment accounts (FDPA) Introductory provisions OC 1 General rules for companies with FDP accounts (1) (2) (3) (4) (5) FDPA company A company resident in New Zealand may choose to become a foreign dividend payment account (FDPA) company.

This subsection does not apply to a portfolio tax rate entity.

FDP accounts An FDPA company must maintain a foreign dividend payment (FDP) account for a tax year.
The account is a record of FDP credits and FDP debits that arise in the account during the tax year.

Main credit [Repealed] [Repealed] Main debit An FDPA company has an FDP debit for the amount of an FDP credit attached to a dividend paid to the company’s sharehold- ers.

Treatment of FDP credit by shareholder The amount of an FDP credit attached to a dividend derived by a shareholder is included in the amount of the dividend under section CD 15 (Tax credits linked to dividends).
Refunds (6) When a dividend with an FDP credit attached is derived by a non-resident or by a person who is resident and the dividend is exempt income of the person, they are entitled to a refund under section LF 8 (Credits for persons who are non-resident or who receive exempt income).
Shareholder continuity requirements The carrying forward of a credit in a company’s FDP account is subject to the shareholder continuity requirements of section OA 8 (Shareholder continuity requirements for memorandum accounts).
(7) 1982 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 3 (8) Imputation credits If a company does not choose to become an FDPA company, a payment of FDP on a dividend derived from a non-resident company is accounted for under the imputation rules under section OB 11 (ICA payment of FDP).
Deﬁned in this Act: amount, assessable income, company, dividend, exempt in- come, FDP account, FDP credit, FDP debit, FDPA company, imputation rules, income, non-resident company, pay, portfolio tax rate entity, resident in New Zealand, shareholder, tax year Compare: 2004 No 35 ss CD 9, LD 9, ME 4(1)(e), (f), MG 2(1), (3), MG 4(1)(a), (b), MG 5(3) Section OC 1(3) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 401(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 1(3): repealed (with effect on 30 June 2009), on 6 October 2009, by section 401(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OC 2 FDP accounts (1) (2) General rules apply The general rules on memorandum accounts set out in sections OA 2 and OA 3 (which relate to the treatment of memorandum accounts) apply to the FDP account of an FDPA company.
Consolidated groups Under section OP 54 (When credits and debits arise only in consolidated FDP group accounts), certain credits and debits do not arise in the account if the company is part of a consoli- dated group.
Deﬁned in this Act: consolidated group, FDP account, FDPA company, memo- randum account Compare: 2004 No 35 s MG 16(1), (4) OC 3 Choosing to become FDPA company (1) Election A company that chooses to become an FDPA company must notify the Commissioner of the election no later than 21 days after the date of the election or by a later date if the Commis- sioner allows.
1983 Part O s OC 4 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Effect of election An FDPA company must maintain the FDP account referred to in section OC 1(2) from the date of election.

Deﬁned in this Act: Commissioner, company, FDP account, FDPA company, notify Compare: 2004 No 35 s MG 2(2), (3) OC 4 When company chooses to stop being FDPA company (1) (2) (3) Election An FDPA company may choose to stop being an FDPA com- pany.
When election made An FDPA company may make an election under subsection (1) only in a tax year that is later than the tax year in which the company chooses under section OC 3 to become an FDPA company.
When company’s status ends The company ends its status as an FDPA company from the ﬁrst day of the tax year after the tax year in which the election referred to in subsection (2) is made but only if the company— ﬁles an annual FDPA return for the year of elec- (a) tion in the time allowed by section 71 of the Tax Administration Act 1994; and pays any further income tax payable under section OC 30 or OC 31 for the year of election.
(b) Deﬁned in this Act: amount, annual FDPA return, FDP, FDPA company, further FDP, pay, tax year Compare: 2004 No 35 s MG 2(4), (5) Section OC 4(3)(b): substituted (with effect on 30 June 2009), on 6 October 2009, by section 403(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OC 5 When company emigrates Status ends If an emigrating company is an FDPA company immediately before the time of emigration, its status as an FDPA company ends at the time of emigration.
Further payments and returns The company referred to in subsection (1) must— (1) (2) 1984 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 8 (a) (b) ﬁle an annual FDPA return for the tax year in which the company becomes non-resident; and pays any further income tax payable under sections OC 30 to OC 34 for the tax year.
Deﬁned in this Act: annual FDPA return, emigrating company, FDPA company, further FDP, non-resident, pay, tax year, time of emigration Compare: 2004 No 35 s MG 2(6), (7) Section OC 5(2)(b): substituted (with effect on 30 June 2009), on 6 October 2009, by section 404(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OC 6 FDPA payment of FDP FDP credits [Repealed] Section OC 6: repealed (with effect on 30 June 2009), on 6 October 2009, by section 405(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

OC 7 FDPA dividend derived with FDP credit (1) (2) (3) Credit An FDPA company has an FDP credit for the amount of an FDP credit attached to a dividend derived by the company.
Table reference The FDP credit in subsection (1) is referred to in table O3: FDP credits, row 4 (dividend derived with FDP credit).

Credit date The credit date is the day the dividend is paid.
Deﬁned in this Act: amount, dividend, FDP credit, FDPA company, pay Compare: 2004 No 35 s MG 4(1)(b), (2)(b) OC 8 FDPA payment of FDP for transfer from CTR account [Repealed] Section OC 8: repealed (with effect on 30 June 2009), on 6 October 2009, by section 406(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
1985 Part O s OC 9 Income Tax Act 2007 Reprinted as at 1 January 2010 OC 9 FDPA transfer for net foreign attributed income [Repealed] Section OC 9: repealed (with effect on 30 June 2009), on 6 October 2009, by section 407(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
OC 10 FDPA payment of FDP for conduit debit balance [Repealed] Section OC 10: repealed (with effect on 30 June 2009), on 6 October 2009, by section 408(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OC 11 FDPA credit transfer to company (1) (2) (3) Credit An FDPA company has an FDP credit for the amount of a credit shown in a credit transfer notice given to the company.
Table reference The FDP credit in subsection (1) is referred to in table O3: FDP credits, row 8 (credit transfer).

Credit date The credit date is the day the notice is given.
Deﬁned in this Act: amount, credit transfer notice, FDP credit, FDPA company Compare: 2004 No 35 s MG 4(1)(bd), (2)(bd) OC 12 FDPA reversal of tax advantage arrangement When this section applies This section applies when it is established that an FDP credit in an FDPA company’s FDP account was incorrectly determined to be the subject of an arrangement to obtain a tax advantage.
Credit The company has an FDP credit for an amount equal to the amount of a debit in the company’s FDP account under section OC 25.

Table references The FDP credit in subsection (2) is referred to in table O3: FDP credits, row 9 (reversal of tax advantage arrangement).

The FDP debit in subsection (2) is referred to in table O4: FDP debits, row 14 (tax advantage arrangement).
(1) (2) (3) 1986 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 14 (4) Credit date The credit date is the same as the debit date recorded for the debit.

Deﬁned in this Act: amount, FDP account, FDP credit, FDPA company, tax advantage Compare: 2004 No 35 s MG 4(1)(d), (2)(d) OC 13 FDPA payment of dividend FDP debits (1) (2) (3) Debit An FDPA company has an FDP debit for the amount of an FDP credit attached to a dividend paid by the company.
Table reference The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 2 (payment of dividend).

Debit date The debit date is the day the dividend is paid.

Deﬁned in this Act: amount, dividend, FDP credit, FDP debit, FDPA company, pay Compare: 2004 No 35 s MG 5(1)(a), (2)(a) OC 14 FDPA refund of FDP (1) (2) (3) Debit An FDPA company has an FDP debit for the amount of a re- fund of FDP paid to the company.

Subsection (3) overrides this subsection.


Table reference The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 3 (refund of FDP).

No debit The company does not have a debit for the amount of— (a) a refund to the extent to which it refunds FDP paid be- fore a debit arises under section OC 24 (table O4: FDP debits, row 13 (debit for loss of shareholder continu- ity)); or a refund of FDP paid under section OD 25 (Refunds on transfers to CTR account).
(b) 1987 Part O s OC 15 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Debit date The debit date is the day the refund is made.

Deﬁned in this Act: amount, FDP, FDP account, FDP debit, FDPA company, pay Compare: 2004 No 35 s MG 5(1)(d), (2)(d) OC 15 FDPA overpayment of FDP (1) (2) (3) Debit An FDPA company has an FDP debit for the amount of an overpayment of FDP that is applied to pay an amount due under the Inland Revenue Acts.

Subsection (3) overrides this subsection.


Table reference The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 4 (overpayment of FDP).
No debit The company does not have a debit for the amount of an over- payment of FDP— (a) (b) that is applied to satisfy a liability for FDP; or that— (i) relates to a payment of FDP before an FDP debit arises under section OC 24 (table O4: FDP debits, row 13 (debit for loss of shareholder continuity)); and is no more than the debit for loss of shareholder continuity.

(ii) (4) Debit date The debit date is the day the amount is applied.
Deﬁned in this Act: amount, FDP, FDP debit, FDPA company, Inland Revenue Acts, pay, shareholder Compare: 2004 No 35 s MG 5(1)(k), (2)(i) OC 16 FDPA refund of tax credit Debit An FDPA company has an FDP debit for the amount of a trans- fer or refund to the company under section LA 6(2)(d) or (e) (Remaining refundable credits: PAYE, RWT, and certain other items) to the extent to which the amount transferred or re- (1) 1988 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 18 (2) (3) funded is a tax credit under subpart LF (Tax credits for FDP credits).
Table reference The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 5 (refund of tax credit).

Debit date The debit date is the day the transfer or refund is made.

Deﬁned in this Act: amount, FDP debit, FDPA company Compare: 2004 No 35 s MG 5(1)(e), (2)(d) Section OC 16(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 409(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 16(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 409(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OC 17 FDPA credit transfer by company (1) (2) (3) Debit An FDPA company has an FDP debit for the amount of an FDP credit attached to a dividend paid by the company and shown in a credit transfer notice given by the company.
Table reference The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 6 (credit transfer).

Debit date The debit date is the day the dividend is paid.
Deﬁned in this Act: amount, credit transfer notice, dividend, FDP credit, FDP debit, FDPA company, pay Compare: 2004 No 35 s MG 5(1)(ab), (2)(ab) OC 18 FDPA transfer to imputation credit account (1) Election An FDPA company may choose for a tax year to transfer some or all of a closing credit balance in the company’s FDP account to the imputation credit account of— (a) (b) the company; or an imputation group of which the company is part.
1989 Part O s OC 18 Income Tax Act 2007 Reprinted as at 1 January 2010 Debit and credit The amount transferred is— (a) (b) an FDP debit in the company’s FDP account; and an imputation credit under, as applicable,— (i) section OB 12 (ICA transfer from FDP account) in the company’s imputation credit account; or section OP 18 (Consolidated ICA transfer from group company’s FDP account) in the imput- ation credit account of the consolidated imput- ation group.
(ii) Table references The table references are as follows: (a) (b) (c) the FDP debit in subsection (2)(a) is referred to in table O4: FDP debits, row 7 (transfer to imputation credit account): the imputation credit in subsection (2)(b)(i) is referred to in table O1: imputation credits, row 10 (transfer from FDP account): the imputation credit in subsection (2)(b)(ii) is referred to in table O19: imputation credits of consolidated im- putation groups, row 13 (transfer from group company’s FDP account).
Method of election The company makes the election by recording the credit bal- ance transferred as— (a) (b) a debit in the company’s FDP account; and a credit in the imputation credit account of— (i) (ii) the company; or the imputation group.

CTR companies Despite subsection (1), an FDPA company that is also a CTR company may not choose to make the transfer.

Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, CTR company, consolidated imputation group, FDP, FDP account, FDP debit, FDPA company, imputation credit, imputation credit account, imputation group, tax year Compare: 2004 No 35 ss MG 5(1)(c), (2)(c), MG 11 (2) (3) (4) (5) (6) 1990 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 19 OC 19 FDPA transfer to CTR account (1) (2) (3) (4) (5) Debit An FDPA company has an FDP debit for an amount transferred when a credit balance in the company’s FDP account is treated under subsections (2) and (3) as transferred to the company’s CTR account.
The amount of the debit is the smaller of the credit balance and debit balance in subsection (2).

When debit arises The debit for the transfer arises when— (a) a credit balance exists in the company’s FDP account immediately before the end of the tax year; and a debit balance exists in the company’s CTR account immediately before the end of the tax year.
Determining balances For the purposes of subsection (2), — (a) the credit balance in the FDP account is found by in- cluding an FDP credit under section OC 9; and the debit balance in the CTR account is found by includ- ing a CTR credit under section OD 5 (CTRA tax credit for conduit tax relief); and the debit balance and the credit balance are determined immediately before a transfer under this section is made.
(b) (b) (c) Amount of debit and credit The smaller of the debit balance or the credit balance referred to in subsection (2) becomes— (a) (b) the FDP debit transferred; and the CTR credit under section OD 6 (CTRA transfer from FDP account).
Table references The table references are as follows: (a) (b) the FDP debit in subsection (1) is referred to in table O4: FDP debits, row 8 (transfer to CTR account): the FDP credit in subsection (3)(a) is referred to in table O3: FDP credits, row 6 (transfer for net foreign at- tributed income): 1991 Part O s OC 20 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) (d) (e) the CTR credit in subsection (3)(b) is referred to in table O5: CTR credits, row 2 (tax credit for conduit tax re- lief): the FDP credit in subsection (4)(a) is referred to in table O4: FDP debits, row 8 (transfer to CTR account): the CTR credit in subsection (4)(b) is referred to in table O5: CTR credits, row 3 (transfer from FDP account).
Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, CTR account, CTR credit, FDP account, FDP credit, FDP debit, FDPA company, foreign attributed income, income tax, tax year Compare: 2004 No 35 ss MG 5(1)(ca), (2)(ca), MI 6(1) (6) OC 20 FDPA transfer to policyholder credit account Election An FDPA company that is also a policyholder credit account (PCA) company may, for a tax year,— (a) choose to transfer some or all of a credit balance in the company’s FDP account to its policyholder credit account; or be treated as choosing to transfer a credit in the FDP account to the policyholder credit account.
(b) Debit and credit The credit balance or the amount of the credit transferred is— (a) (b) an FDP debit; and a policyholder credit under section OJ 4 (PCA transfer from FDP account).

Method of election The FDPA company makes the election by recording the amount transferred as— (a) (b) a debit in the FDP account; and a credit in the policyholder credit account.
Scope of election If the credit balance in subsection (1)(a) includes an FDP credit under section OC 7, the company must make the election under subsection (1) no later than the end of the tax year in which the debit date for the transfer of the FDP credit occurs.
(1) (2) (3) (4) 1992 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 20 (5) (6) (7) Mandatory transfer In the absence of an election under subsection (1)(a), an FDPA company is treated as having chosen to transfer a credit bal- ance that includes an FDP credit under section OC 6 during the tax year when the FDP credit has not been cancelled by a later FDP debit under section OC 14 before the end of the company’s accounting year corresponding to the tax year.
Cancellation order For the purposes of subsection (5), debits are treated as reduc- ing credits in the order in which the credits arise.
Table references The table references are as follows: (a) the FDP debit in subsection (2)(a) is referred to in table O4: FDP debits, row 9 (transfer to policyholder credit account): the policyholder credit in subsection (2)(b) is referred to in table O13: policyholder credits, row 3 (transfer from FDP account): the FDP credit in subsection (4) is referred to in table O3: FDP credits, row 4 (dividend derived with FDP credit): the FDP credit in subsection (5) is referred to in table O3: FDP credits, row 2 (payment of FDP): the FDP debit in subsection (5) is referred to in table O4: FDP debits, row 3 (refund of FDP).
(b) (c) (d) (e) (8) (9) CTR companies Despite subsection (1), an FDPA company that is also a CTR company may not choose to make the transfer.
Credit and debit dates The credit dates and the debit dates for the credit balance and the credits transferred are— (a) the day of election for the credit balance transferred at the company’s election under subsection (1); and 1993 Part O s OC 21 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) the last day of the tax year for a credit that the com- pany is treated under subsection (5) as having chosen to transfer.
Deﬁned in this Act: accounting year, amount, CTR company, dividend, FDP, FDP account, FDP credit, FDP debit, FDPA company, pay, PCA company, policyholder credit, policyholder credit account, tax year Compare: 2004 No 35 ss MG 5(1)(b), (2)(b), MG 7 OC 21 FDPA transfer to group account (1) (2) (3) Debit An FDPA company has an FDP debit for an amount equal to the amount of an FDP credit under section OP 59 (Con- solidated FDPA group company’s credit) for the transfer of a credit to the FDP account of the consolidated group of which the company is part.
Table references The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 10 (transfer to group account).

The FDP credit in subsection (1) is referred to in table O21: FDP credits of consolidated FDP groups, row 5 (group company’s credit).

Debit date The debit date is the same as the credit date recorded in the consolidated group’s FDP account.
Deﬁned in this Act: amount, consolidated group, FDP account, FDP credit, FDP debit, FDPA company Compare: 2004 No 35 s MG 16(3) OC 22 FDPA breach of FDP ratio Debit An FDPA company has an FDP debit for a breach of the bench- mark dividend rules in section OC 28(4) for an amount calcu- lated using the formula— net dividends × FDP ratio – credits attached.
Deﬁnition of items in formula In the formula,— (a) net dividends is the total amount of all dividends paid by the company during the tax year, excluding imput- ation credits and FDP credits attached to the dividends: (1) (2) 1994 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 23 (b) (c) FDP ratio is the maximum permitted ratio calculated under section OA 18(2) (Calculation of maximum per- mitted ratios) or, if it is less, the greatest FDP ratio of dividends paid by the company during the tax year: credits attached is the total amount of all FDP credits attached to dividends paid by the company during the tax year.
Table reference The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 11 (breach of FDP ratio).

Ratio change declaration A debit under subsection (1) does not arise if the FDPA com- pany provides a ratio change declaration under section OC 28(6).

Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, benchmark dividend, dividend, FDP account, FDP credit, FDP debit, FDP ratio, FDPA company, imputation credit, pay, tax year Compare: 2004 No 35 ss MG 5(1)(f), (2)(e), MG 8(4) (3) (4) (5) OC 23 FDPA breach of FDP ratio by PCA company (1) Debit An FDPA company has an FDP debit for a tax year for an amount described in subsection (2) when— (a) (b) (c) the company is also a PCA company; and the company is not also a CTR company; and during the tax year the company pays a dividend with an FDP credit attached; and the dividend does not result from an election by— (i) (d) a statutory producer board under sections OB 73 to OB 75 (which relate to producer boards’ no- tional distributions); or a co-operative company under sections OB 78 to OB 80 (which relate to co-operative companies’ notional distributions); and (ii) (e) a positive amount exists for the total amount of the com- pany’s policyholder income and policyholder net loss 1995 Part O s OC 23 Income Tax Act 2007 Reprinted as at 1 January 2010 for the tax year under the policyholder base calculation for each tax year of the FDP reference period; and the shareholder FDP ratio for the FDP reference period is more than the policyholder FDP ratio.
(f) Table reference The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 12 (breach of FDP ratio by PCA company).

Amount of debit The amount of the debit is— (a) the maximum deﬁcit debit if the credit balance in the FDP account at the end of the tax year, but before the debit arises, is more than the maximum deﬁcit debit; or the reduced deﬁcit debit if paragraph (a) does not apply.
(b) Consolidated group This section applies, modiﬁed as necessary, to a consolidated group with a policyholder credit account as if the group were a single company.
In the application of this section to the group,— (a) the deﬁnition of the item total credits in the deﬁnition of policyholder FDP ratio in section OC 37(3) is read as referring to a transfer under section FM 30(3) and (4) (Application of certain provisions to consolidated groups) to the group’s policyholder credit account; and a dividend paid between group companies is disre- garded.

(b) Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, company, CTR company, consolidated group, co-operative company, dividend, FDP, FDP account, FDP credit, FDP debit, FDP ratio, FDP reference period, FDPA company, income tax, maximum deﬁcit debit, PCA company, policyholder base, policyholder credit account, policy- holder FDP ratio, policyholder income, policyholder net loss, reduced deﬁcit debit, shareholder, shareholder FDP ratio, statutory producer board, tax year Compare: 2004 No 35 ss MG 5(1)(g), (2)(e), MG 8B, MG 16A(1B) (2) (3) (4) (5) 1996 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 25 OC 24 FDPA debit for loss of shareholder continuity (1) (2) (3) (4) Debit An FDPA company has an FDP debit for the amount equal to the amount of an FDP credit retained in the FDP account and unused at the time at which shareholder continuity is lost.
Table reference The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 13 (debit for loss of shareholder continuity).

When debit arises The debit arises at the time shareholder continuity is lost.

Avoidance arrangements Section GB 41 (FDPA arrangements for carrying amounts for- ward) may apply to treat a company as not meeting the require- ments of this section.
Deﬁned in this Act: amount, FDP account, FDP credit, FDP debit, FDPA com- pany, shareholder Compare: 2004 No 35 s MG 5(1)(i), (2)(g), (3), (4) Section OC 24(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 89(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section OC 24(3) heading: substituted (with effect on 1 April 2008), on 7 De- cember 2009, by section 89(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section OC 24(3): substituted (with effect on 1 April 2008), on 7 December 2009, by section 89(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
OC 25 FDPA tax advantage arrangement (1) (2) Debit An FDPA company has an FDP debit for the amount of a debit for a tax advantage arrangement determined under sections GB 35 and GB 36 (which relate to imputation arrangements to obtain tax advantage).

Table reference The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 14 (tax advantage arrangement).
1997 Part O s OC 26 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Debit date The debit date is the last day of the tax year in which the tax advantage arrangement began.

Deﬁned in this Act: amount, arrangement, FDP debit, FDPA company, tax ad- vantage, tax year Compare: 2004 No 35 s MG 5(1)(h), (2)(f) OC 26 FDPA ﬁnal balance (1) (2) (3) Debit An FDPA company has an FDP debit for a credit balance in the FDP account when the company stops being an FDPA com- pany.
Table reference The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 15 (ﬁnal balance).

Debit date The debit date is the day the company stops being an FDPA company.

Deﬁned in this Act: FDP account, FDP debit, FDPA company Compare: 2004 No 35 s MG 5(1)(j), (2)(h) FDP credits attached to dividends OC 27 FDP credits attached to dividends Attaching FDP credits (1) When an FDPA company pays a dividend, it may attach an FDP credit to the dividend.
Subsection (2) overrides this sub- section.

(2) (3) Exclusion Subsection (1) does not apply to an FDPA company that is also a CTR company.
FDP ratio for dividend A dividend with an FDP credit attached has an FDP ratio cal- culated using the formula— 1998 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 28 (4) (5) Deﬁnition of items in formula In the formula,— (a) credit attached is the amount of FDP credit attached to the dividend: net dividends is the amount of dividends paid, exclud- ing imputation credits and FDP credits.
(b) Maximum permitted ratio A dividend with an FDP credit attached must not have an FDP ratio that is more than the maximum permitted ratio calculated under section OA 18(2) (Calculation of maximum permitted ratios).
Deﬁned in this Act: amount, company, CTR company, dividend, FDP, FDP account, FDP credit, FDP ratio, FDPA company, imputation credit, maximum permitted ratio, pay Compare: 2004 No 35 ss MG 6, MG 8(1), (2) OC 28 FDPA benchmark dividend rules (1) (2) (3) (4) (5) When this section applies This section applies when an FDPA company pays a dividend on more than 1 occasion during a tax year.

Subsection (2) overrides this subsection.


Exclusions This section does not apply to a dividend that is the subject of an election by— (a) a statutory producer board under sections OB 73 to OB 75 (which relate to statutory boards’ notional distribu- tions); and a co-operative company under sections OB 78 to OB 80 (which relate to co-operative companies’ notional distributions).

(b) Benchmark dividend The ﬁrst dividend of the tax year is the benchmark dividend.
Same FDP ratio The FDP ratio of a dividend paid after the benchmark dividend must be the same as the FDP ratio of the benchmark dividend.

Breach of FDP ratio A breach of subsection (4) gives rise to an FDP debit under section OC 22 (table O4: FDP debits, row 11 (breach of FDP 1999 Part O s OC 29 Income Tax Act 2007 Reprinted as at 1 January 2010 (6) (7) (8) (9) ratio)) for an amount calculated using the formula in section OC 22(1).
Ratio change declaration An FDPA company may notify the Commissioner that the dividend is not part of an arrangement to obtain a tax advan- tage by providing a ratio change declaration stating that the dividend is not part of an arrangement to which sections GB 35 and GB 36 (which relate to imputation arrangements to ob- tain tax advantage) apply.

The company must provide the dec- laration before the dividend is paid, or by a later date if the Commissioner allows.
For the purposes of this subsection, the dividend must not be part of an arrangement to obtain a tax ad- vantage.

This subsection overrides subsection (5).

Consolidated group This section applies, modiﬁed as necessary, to a consolidated group as if it were a single company.
Group debit Under section OP 54 (When credits and debits arise only in consolidated FDP group accounts), a breach of an FDP ratio alternatively gives rise to an FDP debit under section OP 72 (Consolidated FDPA breach of FDP ratio) (table O22: FDP debits of consolidated group, row 10 (breach of FDP ratio)) if the company is part of a consolidated group.

Treatment of group dividends In the application of this section to a consolidated group, a dividend paid between group companies is disregarded.
Deﬁned in this Act: amount, arrangement, benchmark dividend, Commis- sioner, company, consolidated group, co-operative company, dividend, FDP, FDP debit, FDP ratio, FDPA company, pay, statutory producer board, tax advantage, tax year Compare: 2004 No 35 ss MG 8(2), (3), MG 16A(1) OC 29 FDP credits and imputation credits attached to dividends Attaching combined credits (1) When an FDPA company pays a dividend, it may attach both an FDP credit and an imputation credit to the dividend.
2000 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 29 (2) (3) (4) (5) (6) (7) Combined ratio A dividend with combined credits attached has a combined imputation and FDP ratio calculated using the formula— Deﬁnition of items in formula In the formula in subsection (2),— (a) combined credits attached is the total amount of FDP credits and the imputation credits attached to the divi- dend: net dividends is the amount of dividends paid, ex- cluding the amount of FDP credits and the imputation credits.
(b) Maximum permitted ratio A dividend with combined credits attached must not have a combined imputation and FDP ratio that is more than the maxi- mum permitted ratio calculated under section OA 18(2) (Cal- culation of maximum permitted ratios).

Breach of combined ratio breach A breach of the maximum ratio referred to in subsection (4) gives rise to an excess credit amount that is calculated using the formula— net dividends × (combined ratio – maximum ratio).
Deﬁnition of items in formula In the formula in subsection (5),— (a) net dividends is the amount of dividends paid, exclud- ing FDP credits and the imputation credits: combined ratio is the combined imputation and FDP ratio of the dividend: maximum ratio is the maximum combined imputation and FDP ratio permitted under subsection (4).

(b) (c) Relationship with section OZ 8 Section OZ 8 (Attaching imputation credits and FDP credits: maximum permitted ratio) may apply to modify this section.
Deﬁned in this Act: amount, basic rate, combined imputation and FDP ratio, company, dividend, excess credit amount, FDP credit, FDP ratio, FDPA com- 2001 Part O s OC 30 Income Tax Act 2007 Reprinted as at 1 January 2010 pany, imputation credit, income tax, income year, maximum permitted ratio, pay, tax year Compare: 2004 No 35 s MG 10 Section OC 29(7) heading: added, on 1 April 2008, by section 504 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OC 29(7): added, on 1 April 2008, by section 504 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

Further income tax Heading: substituted (with effect on 30 June 2009), on 6 October 2009, by sec- tion 412 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OC 30 Payment of further income tax for closing debit balance Liability An FDPA company or consolidated FDP group is liable to pay further income tax for a closing debit balance in the FDP account of the company or the group.

Due date The company or group must pay the further income tax to the Commissioner no later than the 20 June following the end of the tax year.
Application of other provisions [Repealed] [Repealed] Deﬁned in this Act: amount, Commissioner, company, consolidated FDP group, FDP account, FDPA company, further income tax, pay, tax year Compare: 2004 No 35 s MG 9(1), (2), (6) Section OC 30 heading: amended (with effect on 30 June 2009), on 6 October 2009, by section 413(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 30(1) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 413(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

Section OC 30(1): substituted (with effect on 30 June 2009), on 6 October 2009, by section 413(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 30(2) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 413(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

(1) (2) (3) 2002 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 31 Section OC 30(2): substituted (with effect on 30 June 2009), on 6 October 2009, by section 413(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 30(3) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 413(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OC 30(3): repealed (with effect on 30 June 2009), on 6 October 2009, by section 413(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 30 list of deﬁned terms FDP rules: repealed (with effect on 30 June 2009), on 6 October 2009, by section 413(4)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OC 30 list of deﬁned terms further FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 413(4)(a) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 30 list of deﬁned terms income tax: repealed (with effect on 30 June 2009), on 6 October 2009, by section 413(4)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OC 30 list of deﬁned terms further income tax: inserted (with effect on 30 June 2009), on 6 October 2009, by section 413(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OC 31 Payment of further income tax when company no longer New Zealand resident (1) (2) (3) Liability An FDPA company is liable to pay further income tax for a debit balance in the company’s FDP account when the com- pany stops being resident in New Zealand.

Due date The company must pay the further income tax to the Commis- sioner by the day the company stops being resident in New Zealand.
Paramount section A company to which this section applies that stops being an FDPA company on the last day of a tax year is liable for further income tax under this section and not under section OC 30.
Application of other provisions 2003 Part O s OC 31 Income Tax Act 2007 Reprinted as at 1 January 2010 [Repealed] [Repealed] Deﬁned in this Act: Commissioner, FDP account, FDPA company, further in- come tax, pay, resident in New Zealand, tax year Compare: 2004 No 35 s MG 9(3) Section OC 31 heading: amended (with effect on 30 June 2009), on 6 October 2009, by section 414(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 31(1) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 414(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

Section OC 31(1): substituted (with effect on 30 June 2009), on 6 October 2009, by section 414(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 31(2) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 414(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

Section OC 31(2): substituted (with effect on 30 June 2009), on 6 October 2009, by section 414(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 31(3) heading: substituted (with effect on 30 June 2009), on 6 Oc- tober 2009, by section 414(2) of the Taxation (International Taxation, Life In- surance, and Remedial Matters) Act 2009 (2009 No 34).

Section OC 31(3): substituted (with effect on 30 June 2009), on 6 October 2009, by section 414(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 31(4) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 414(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OC 31(4): repealed (with effect on 30 June 2009), on 6 October 2009, by section 414(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 31 list of deﬁned terms FDP rules: repealed (with effect on 30 June 2009), on 6 October 2009, by section 414(4)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OC 31 list of deﬁned terms further FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 414(4)(a) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 31 list of deﬁned terms further income tax: inserted (with effect on 30 June 2009), on 6 October 2009, by section 414(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(4) 2004 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 33 OC 32 Reduction of further income tax (1) (2) Debit at previous year-end An FDPA company’s liability for further income tax under section OC 30 or OC 31 may be reduced under subsection (2) if— (a) a debit balance existed in the company’s FDP account at the end of a tax year; and a credit that arises in the account in the following tax year is less than the debit balance; and the company notiﬁes the Commissioner.
(b) (c) Amount of reduction The liability is reduced by the amount that is the debit balance for the tax year less the total amount of credits for the follow- ing tax year.
Deﬁned in this Act: amount, Commissioner, FDP account, FDP credit, FDPA company, further income tax, notify, tax year Compare: 2004 No 35 s MG 9(7), (8) Section OC 32 heading: amended (with effect on 30 June 2009), on 6 October 2009, by section 415(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 32(1): amended (with effect on 30 June 2009), on 6 October 2009, by section 415(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OC 32 list of deﬁned terms further FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 415(3)(a) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OC 32 list of deﬁned terms further income tax: inserted (with effect on 30 June 2009), on 6 October 2009, by section 415(3)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OC 33 Income tax paid satisfying liability for further income tax (1) Election On meeting the requirements of subsection (2), an FDPA com- pany that is liable for further income tax may choose to satisfy the liability through a payment of income tax.
Requirements The company must pay the income tax— (2) 2005 Part O s OC 34 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (a) (b) after the end of the tax year in which the relevant debit balance arises; and for an income year corresponding to a tax year in which the company is an FDPA company.

Payment credited The payment of income tax satisﬁes the company’s liability to pay further income tax.
When treated as paid The further income tax is treated as paid on the day the Com- missioner receives the payment of income tax.

Deﬁned in this Act: Commissioner, company, FDPA company, further income tax, income tax, income year, pay, tax year Section OC 33: substituted (with effect on 30 June 2009), on 6 October 2009, by section 416(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OC 34 Further income tax paid satisfying liability for income tax Election A company that pays further income tax may choose to treat the payment as satisfying a liability of the company to pay income tax.

FDPA company status The liability referred to in subsection (1) must be for an income year that corresponds with a tax year in which the company is an FDPA company.
Alternative for consolidated group A company that is part of a consolidated FDP group may choose that the payment under subsection (1) satisﬁes a group liability for income tax owed by another group company when or after the payment is made.
Deﬁned in this Act: company, consolidated FDP group, FDPA company, fur- ther income tax, income tax, income year, pay, tax year Section OC 34: substituted (with effect on 30 June 2009), on 6 October 2009, by section 417(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(1) (2) (3) 2006 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 36 OC 35 Meaning of FDP reference period Some deﬁnitions (1) (2) When this section applies This section applies for the purposes of sections OC 23 and OC 36 to OC 39.
Meaning FDP reference period, for an FDPA company, means the period comprising the tax year and the longest period of con- secutive tax years in which the FDPA company did not pay a dividend with an FDP credit attached that— (a) (b) starts on or after the debit date for the debit; and ends on the last day of the tax year that falls before the tax year in which the dividend referred to in section OC 23(1)(c) is paid.
Deﬁned in this Act: dividend, FDP credit, FDPA company, pay, tax year Compare: 2004 No 35 ss MG 8B(4), OB 1 DWP reference period OC 36 Meaning of maximum deﬁcit debit When this section applies This section applies for the purposes of section OC 23.

(1) Meaning (2) Maximum deﬁcit debit means the amount calculated using the formula— (shareholder ratio – policyholder ratio) × net result × (1 – tax rate).
(3) Deﬁnition of items in formula In the formula,— (a) shareholder ratio is an FDPA company’s shareholder FDP ratio for the FDP reference period: policyholder ratio is the company’s policyholder FDP ratio for the FDP reference period: net result is the amount of the company’s policyholder income less its policyholder net losses for the FDP ref- erence period under the policyholder base calculation for each tax year: tax rate is the basic rate of income tax set out in— (b) (c) (d) 2007 Part O s OC 37 Income Tax Act 2007 Reprinted as at 1 January 2010 (i) (ii) schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) if the company is not a Maori authority; or schedule 1, part A, clause 7 if the company is a Maori authority.
Deﬁned in this Act: amount, basic rate, FDP reference period, income tax, Maori authority, policyholder base, policyholder FDP ratio, policyholder in- come, policyholder net loss, shareholder FDP ratio, tax year Compare: 2004 No 35 ss MG 8B(4), OB 1 maximum deﬁcit debit Section OC 36(3)(d)(i): amended, on 1 April 2008, by section 562 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OC 37 Meaning of policyholder FDP ratio When this section applies This section applies for the purposes of sections OC 23 and OC 36.
Meaning Policyholder FDP ratio means the ratio of credits to the underlying amount that is calculated using the formula— Deﬁnition of items in formula In the formula,— (a) total credits is the total policyholder credits under section OJ 4 (PCA transfer from FDP account) (table O13: policyholder credits, row 3 (transfer from FDP ac- count)) in an FDPA company’s policyholder credit ac- count during the FDP reference period: net result is the amount of the company’s policyholder income less the amount of policyholder net losses for the FDP reference period under the policyholder base calculation for each tax year: tax rate is the basic rate of income tax set out in— (i) schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) if the company is not a Maori authority; or (b) (c) (1) (2) (3) 2008 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 38 (ii) schedule 1, part A, clause 7 if the company is a Maori authority.
Deﬁned in this Act: amount, basic rate, FDP reference period, FDPA com- pany, income tax, Maori authority, policyholder base, policyholder credit, pol- icyholder credit account, policyholder income, policyholder net loss, tax year Compare: 2004 No 35 ss MG 8B(4), OB 1 policyholder DWP ratio Section OC 37(3)(c)(i): amended, on 1 April 2008, by section 562 of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OC 38 Meaning of reduced deﬁcit debit When this section applies This section applies for the purposes of section OC 23.
Meaning Reduced deﬁcit debit means the amount calculated for a tax year using the formula— (1) (2) (3) Deﬁnition of items in formula In the formula,— (a) (b) (c) (d) (e) (f) balance is the credit balance in an FDPA company’s FDP account at the end of the previous tax year: FDPC is the total amount of all FDP credits attached to dividends paid by the company during the FDP ref- erence period: dividends is the total amount of all dividends paid by the company during the FDP reference period: PCAC is the total amount of policyholder credits under section OJ 4 (PCA transfer from FDP account) (table O13: policyholder credits, row 3 (transfer from FDP account)) in the company’s policyholder credit account during the FDP reference period: net result is the amount of the company’s policyholder income less the amount of policyholder net losses for the FDP reference period under the policyholder base calculation for each tax year: tax rate is the basic rate of income tax set out in— (i) schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed 2009 Part O s OC 39 Income Tax Act 2007 Reprinted as at 1 January 2010 fringe beneﬁts) if the company is not a Maori authority; or schedule 1, part A, clause 7 if the company is a Maori authority.
(ii) Deﬁned in this Act: amount, basic rate, dividend, FDP account, FDP credit, FDP reference period, FDPA company, income tax, Maori authority, pay, pol- icyholder base, policyholder credit, policyholder credit account, policyholder income, policyholder net loss, tax year Compare: 2004 No 35 ss MG 8B(4), OB 1 reduced deﬁcit debit Section OC 38(3)(f)(i): amended, on 1 April 2008, by section 562 of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OC 39 Meaning of shareholder FDP ratio When this section applies This section applies for the purposes of sections OC 23 and OC 36.
Meaning Shareholder FDP ratio means the ratio of the credits to the underlying amount that is calculated using the formula— Deﬁnition of items in formula In the formula,— (a) credits attached is the total amount of all FDP credits attached to dividends paid by an FDPA company during the FDP reference period: total dividends is the total amount of all dividends paid by the company during the FDP reference period.
Deﬁned in this Act: amount, dividend, FDP credit, FDP reference period, pay Compare: 2004 No 35 ss MG 8B(4), OB 1 shareholder DWP ratio (b) Table O3: FDP credits Row FDP credit Credit date 1 Opening credit balance 1 April Further deﬁned section OA 7 (1) (2) (3) 2010 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OC 39 [Repealed] [Repealed] FDP credit attached to dividend derived day on which dividend is paid section OC 7 [Repealed] [Repealed] [Repealed] FDP credit attached to dividend and shown in credit transfer notice day on which notice is given section OC 11 Reversal of debt for tax advantage arrangement debit date of debit section OC 12 Table O3 row 2: repealed (with effect on 30 June 2009), on 6 October 2009, by section 419(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O3 row 3: repealed (with effect on 30 June 2009), on 6 October 2009, by section 419(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Table O3 row 5: repealed (with effect on 30 June 2009), on 6 October 2009, by section 419(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O3 row 6: repealed (with effect on 30 June 2009), on 6 October 2009, by section 419(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Table O3 row 7: repealed (with effect on 30 June 2009), on 6 October 2009, by section 419(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O4: FDP debits Row FDP debit Debit date 1 Opening debit balance 1 April Further deﬁned section OA 7 2011 Part O s OC 39 Income Tax Act 2007 Reprinted as at 1 January 2010 Further deﬁned section OC 13 section OC 14 section OC 15 section OC 16 section OC 17 section OC 18 Row FDP debit Debit date FDP credit attached to dividend paid day of payment Refund of FDP day of refund Overpaid FDP applied to satisfy tax liability day of application day of transfer or refund day of payment 31 March Transfer or refund of tax credit FDP credit attached to dividend and shown in credit transfer notice Transfer of closing credit balance to companyy’s imputation credit account Transfer of credit balance to company’s conduit tax relief account Transfer of credit balance to company’s policyholder credit account 31 March section OC 19 set out in section 20 section OC 20 10 Transfer of credit to group FDP account credit date under in group account 11 Debit for breach of FDP 31 March ratio section OC 21 section OC 22 2012 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OD 1 Row FDP debit Debit date 12 Breach of FDP ratio by FDPA company that is also PCA company 31 March Further deﬁned section OC 23 13 Debit for loss of shareholder continuity time of loss of continuity section OC 24 14 Debit for tax advantage arrangement 15 Final balance when FDPA company status ends section OC 25 last day of tax year in which arrangement began day of cessation section OC 26 Table O4 row 5: substituted (with effect on 1
 April 2008), on 6 October 2009, by section 420(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O4 row 13: amended (with effect on 1 April 2008), on 7 December 2009, by section 90 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Subpart OD—Conduit tax relief accounts (CTRA) Introductory provisions OD 1 General rules for companies with CTR accounts (1) (2) CTR company A foreign dividend payment account (FDPA) company may choose to become a conduit tax relief (CTR) company.
CTR account A CTR company must maintain a CTR account for a tax year as set out in section OD 3(2).

The account is a record of CTR credits and CTR debits that arise in the account during the tax year.

Credits 2013 Part O s OD 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) (6) (7) [Repealed] [Repealed] Debits Debits to the account include the amount of a CTR credit at- tached to a dividend paid to the company’s non-resident share- holders.
Group accounts A consolidated group must maintain a group CTR account if a group company is a CTR company.

Resident shareholder continuity requirements The carrying forward of a credit in the company’s CTR ac- count is subject to the resident shareholder continuity require- ments of section OD 16.

Relationship with section OZ 17 Section OZ 17 (CTRA reductions) may apply to modify the credits and debits arising under this subpart.
Deﬁned in this Act: amount, amount of tax, CTR account, CTR company, CTR credit, CTR debit, consolidated group, dividend, FDP, FDPA company, foreign attributed income, income tax, non-resident, non-resident passive income, pay, shareholder, tax credit, tax year Compare: 2004 No 35 ss MI 2(1), (4), MI 4(1)(a), MI 5(1)(a), MI 14(1), NG 9(1)(a) Section OD 1(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 421(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OD 1(3) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 421(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OD 1(3): repealed (with effect on 30 June 2009), on 6 October 2009, by section 421(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OD 1(7) heading: added, on 1 April 2008, by section 505 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OD 1(7): added, on 1 April 2008, by section 505 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

OD 2 CTR accounts General rules The general rules on memorandum accounts set out in sections OA 2 and OA 3 (which relate to the treatment of memorandum accounts) apply to the CTR account of a CTR company.
(1) 2014 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OD 3 (2) Credits and debits of consolidated groups Under section OP 79 (When credits and debits arise only in CTR group accounts), certain credits and debits do not arise in the account if the company is part of a consolidated group.
Deﬁned in this Act: CTR account, CTR company, consolidated group, memo- randum account Compare: 2004 No 35 ss MI 2(4), MI 19(1), (5) OD 3 Choosing to become CTR company (1) (2) (3) Notifying Commissioner An FDPA company that chooses to become a CTR company must notify the Commissioner of its election and state the tax year for which the election is ﬁrst to apply.
The notiﬁcation must be made no later than the day on which the company is required to ﬁle a return of income for the income year that corresponds to the ﬁrst tax year for which the election is made.
Maintaining CTR account A CTR company must maintain the CTR account referred to in section OD 1(2) from the ﬁrst day of the tax year referred to in subsection (1), whether or not the company is treated as a CTR company for the purposes of sections LQ 5, OD 20, or RG 7 (which relate to credits attached to dividends).

The company must continue to maintain the account until it chooses to stop being a CTR company under section OD 4.
Treatment of company for certain provisions Despite subsection (1), the company is not treated as a CTR company for the purposes of applying sections LQ 5, OD 20, or RG 7 until the date on which the company notiﬁes the Com- missioner of its election.
Deﬁned in this Act: Commissioner, company, CTR account, CTR company, FDPA company, income year, notify, return of income, tax year Compare: 2004 No 35 s MI 2(1)–(3) Section OD 3(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 422(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OD 3(2) heading: substituted (with effect on 1 April 2008), on 6 Octo- ber 2009, by section 422(2) of the Taxation (International Taxation, Life Insur- ance, and Remedial Matters) Act 2009 (2009 No 34).

2015 Part O s OD 4 Income Tax Act 2007 Reprinted as at 1 January 2010 Section OD 3(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 422(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OD 3(3) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 422(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OD 3(3): added (with effect on 1 April 2008), on 6 October 2009, by section 422(2) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
OD 4 When company stops being CTR company Election A company stops being a CTR company— by election under subsection (2); or (a) when the company stops being an FDPA company (b) under section OC 4 (When company chooses to stop being FDPA company).

When election made A CTR company may make an election under subsection (1)(a) only in a tax year that is later than the tax year in which the company chooses under section OD 3 to become a CTR company.
When company’s status ends The company stops being a CTR company on the day after the day on which the election referred to in subsection (1)(a) is made but only if the company— (a) ﬁles an annual imputation credit account (ICA) return for the year of election in the time allowed by section 69 of the Tax Administration Act 1994; and pays further FDP, if any, under section OD 23 or OD 24 for the year of election.
(b) Continuation of account The company must continue to maintain its CTR account to the end of the year of election.

Deﬁned in this Act: annual ICA return, company, CTR account, CTR company, FDPA company, further FDP, tax year Compare: 2004 No 35 s MI 2(5)–(7) Section OD 4(3): amended (with effect on 30 June 2009), on 6 October 2009, by section 423(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(1) (2) (3) (4) 2016 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OD 7 CTR credits OD 5 CTRA tax credit for conduit tax relief [Repealed] Section OD 5: repealed (with effect on 30 June 2009), on 6 October 2009, by section 424(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OD 6 CTRA transfer from FDP account (1) (2) (3) Credit A CTR company has a CTR credit for an amount equal to the amount of an FDP debit under section OC 19 (FDPA transfer to CTR account) for a transfer to the CTR account.

Table references The CTR credit in subsection (1) is referred to in table O5: CTR credits, row 3 (transfer from FDP account).

The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 8 (transfer to CTR account).
Credit date The credit date is the last day of the tax year.

Deﬁned in this Act: amount, CTR account, CTR company, CTR credit, FDP account, FDP debit, tax year Compare: 2004 No 35 ss MI 4(1)(e), (2)(e), MI 6(1) OD 7 CTRA dividend derived with CTR credit (1) (2) (3) Credit A CTR company has a CTR credit for the amount of a CTR credit attached to a dividend derived by the company.
Table reference The CTR credit in subsection (1) is referred to in table O5: CTR credits, row 4 (dividend derived with CTR credit).

Credit date The credit date is the day the dividend is paid.
Deﬁned in this Act: amount, CTR company, CTR credit, dividend, pay Compare: 2004 No 35 s MI 4(1)(c), (2)(c) 2017 Part O s OD 8 Income Tax Act 2007 Reprinted as at 1 January 2010 OD 8 CTRA reduction of FDP [Repealed] Section OD 8: repealed (with effect on 30 June 2009), on 6 October 2009, by section 425(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OD 9 CTRA reversal of tax advantage arrangement (1) (2) (3) (4) When this section applies This section applies when it is established that a CTR credit in a CTR company’s CTR account was incorrectly determined to be the subject of an arrangement to obtain a tax advantage.

Credit The company has a CTR credit for an amount that equals the amount of the debit in the company’s CTR account under sec- tion OD 18.
Table references The CTR credit in subsection (2) is referred to in table O5: CTR credits, row 6 (reversal of tax advantage arrangement).

The CTR debit in subsection (2) is referred to in table O6: CTR debits, row 10 (tax advantage arrangement).

Credit date The credit date is the same as the debit date for the debit.
Deﬁned in this Act: amount, arrangement, CTR account, CTR company, CTR credit, CTR debit, tax advantage Compare: 2004 No 35 s MI 4(1)(d), (2)(d) OD 10 CTRA payment of dividend CTR debits Debit A CTR company has a CTR debit for the amount of a CTR credit attached to a dividend paid by the company.

Table reference The CTR debit in subsection (1) is referred to in table O6: CTR debits, row 2 (payment of dividend).
(1) (2) 2018 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OD 13 (3) Debit date The debit date is the day of payment.

Deﬁned in this Act: amount, CTR company, CTR credit, CTR debit, dividend, pay Compare: 2004 No 35 s MI 5(1)(a), (2)(a) OD 11 CTRA transfer to FDP account [Repealed] Section OD 11: repealed (with effect on 30 June 2009), on 6 October 2009, by section 426(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OD 12 CTRA transfer to group account (1) (2) (3) Debit A CTR company has a CTR debit for an amount equal to the amount of a CTR credit under section OP 84 (Consolidated CTRA group company’s credit) for a transfer of a credit to the CTR account of the consolidated group of which the company is part.

Table references The CTR debit in subsection (1) is referred to in table O6: CTR debits, row 4 (transfer to group account).
The CTR credit in subsection (1) is referred to in table O23: CTR credits of consolidated groups, row 5 (group company’s credit).

Debit date The debit date is the day of transfer.

Deﬁned in this Act: amount, CTR account, CTR company, CTR credit, CTR debit, consolidated group Compare: 2004 No 35 s MI 5(1)(j), (2)(i) OD 13 CTRA adjustment for conduit tax relief (1) (2) Debit A CTR company has a CTR debit for the amount of an adjust- ment under section FF 7(8) (Surplus to foreign dividends).
Table reference The CTR debit in subsection (1) is referred to in table O6: CTR debits, row 5 (adjustment for conduit tax relief).

2019 Part O s OD 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Debit date The debit date is the day the company ﬁles a return of income for the tax year corresponding to the income year in which the adjustment occurred.
Deﬁned in this Act: amount, CTR account, CTR company, CTR debit, income year, return of income, tax year Compare: 2004 No 35 s MI 5(1)(b), (2)(b) OD 14 CTRA break in shareholding chain for group company Debit A CTR company that is part of a wholly-owned group has a CTR debit for an amount arising in the circumstances set out in subsections (2) and (3).
When debit arises A debit under subsection (1) arises when— (a) section OD 5: section OD 8; and a credit has arisen in the company’s CTR account under— (i) (ii) the credit has not been cancelled by a later debit; and sections YD 9 to YD 11 (which relate to the residence of CTR companies and their shareholders) have enabled the credit to arise by treating a CTR group member as a non-resident; and the CTR group member is no longer a CTR group company because the requirements of section YD 11(4) (Meaning of CTR group member) are no longer met.
Table references The table references are as follows: (a) the CTR debit in subsection (1) is referred to in table O6: CTR debits, row 6 (chain break for group com- pany): the CTR credit in subsection (2)(a)(i) is referred to in table O5: CTR credits, row 2 (tax credit for conduit tax relief): the FDP credit in subsection (2)(a)(ii) is referred to in table O5: CTR credits, row 5 (reduction of FDP).
(b) (c) (d) (b) (c) (1) (2) (3) 2020 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OD 15 (4) (5) (6) (7) Cancellation To determine whether the credit has been cancelled by a later debit as described in subsection (2)(b),— (a) credits retain their separate character and are not treated as part of a credit for an opening credit balance under section OA 7 (Opening balances of memorandum ac- counts); and a debit is counted only once in the cancellation of a credit; and debits cancel credits in the order in which the credits arise.
(b) (c) Amount of debit The amount of the debit is the residual amount after taking into account the amount of any cancellation.

Residence The residence of companies for the purposes of this section is determined under sections YD 9 to YD 11.

Debit date The debit date is the day the shareholding chain is broken.
Deﬁned in this Act: amount, company, CTR account, CTR company, CTR credit, CTR debit, CTR group member, FDP, non-resident, shareholder, wholly-owned group Compare: 2004 No 35 s MI 5(1)(f), (2)(f), (5), (7) OD 15 CTRA break in shareholding chain for company (1) (2) Debit A CTR company that is part of a wholly-owned group has a CTR debit for an amount arising in the circumstances set out in subsections (2) and (3).
When debit arises The debit arises when— (a) the company derives a dividend from another company in the same wholly-owned group and the dividend gives rise to a credit under section OD 7 in the company’s CTR account; and the other company is in the same wholly-owned group when the dividend is derived; and the credit has not been cancelled by a later debit; and (b) (c) 2021 Part O s OD 16 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) (6) (d) the company is no longer part of the wholly-owned group because the requirements of section YD 11(4) (Meaning of CTR group member) are no longer met.
Table references The CTR debit in subsection (1) is referred to in table O6: CTR debits, row 7 (chain break when group membership stops).

The CTR credit in subsection (2)(a) is referred to in table O5: CTR credits, row 4 (dividend derived with CTR credit).
Cancellation To determine whether a credit has been cancelled by a later debit under subsection (2)(c),— (a) credits retain their separate character and are not treated as part of a credit for an opening credit balance under section OA 7 (Opening balances of memorandum ac- counts); and a debit is counted only once in the cancellation of a credit; and debits cancel credits in the order in which the credits arise.
(b) (c) Amount of debit The amount of the debit is the residual amount after taking into account the amount of any cancellation.

Debit date The debit date is the day before the company stops being part of the consolidated group.
Deﬁned in this Act: amount, company, CTR account, CTR company, CTR credit, CTR debit, dividend, pay, wholly-owned group Compare: 2004 No 35 s MI 5(1)(g), (2)(f), (5) OD 16 CTRA increase in resident shareholding Debit A CTR company has a CTR debit for an amount of a CTR credit in the company’s CTR account if the resident share- holding requirements of subsection (2) and section OA 8 (Shareholder continuity requirements for memorandum ac- counts) are not met.
(1) 2022 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OD 16 (2) (3) (4) Table reference The CTR debit in subsection (1) is referred to in table O6: CTR debits, row 8 (increase in resident shareholding).
Resident shareholding requirements For the purposes of subsection (1), the resident shareholding requirements are that— (a) the credit continues to exist to the extent to which it is not reduced by a later CTR debit; and since the credit date for the credit, the percentage of the company’s shareholders who are resident in New Zealand does not increase by 34 percentage points or more; and an amount that is the CTR debit under subsection (1) arises for an amount of the credit that still exists when the requirement of paragraph (b) is not met.
(b) (c) Supporting rules The following rules apply for the purposes of subsection (3): the percentage of shareholders resident in New Zealand (a) at any time is found by taking the highest of the follow- ing percentages: (i) (ii) (iii) the percentage of direct voting interests held in the company by residents; and the percentage of direct market value interests held in the company, if a direct market value cir- cumstance exists, by residents; and if not all shares in the company are shares of the same class, the percentage of total dividends that would be derived by residents if the company were liquidated; and (b) (c) a credit retains its separate character and is not treated as part of a credit referred to in section OA 7 (Opening balances of memorandum accounts) in a later tax year; and the amount by which a credit is reduced by an earlier or later debit is found by— (i) treating debits as reducing credits in the order in which the credits arise; and counting a debit, whether some or all, only once in the reduction of a credit; and (ii) 2023 Part O s OD 17 Income Tax Act 2007 Reprinted as at 1 January 2010 (d) (e) the requirement of subsection (3)(b) is met if the in- crease in shareholders resident in New Zealand is solely because the requirements of section YD 10(4) (Mean- ing of CTR holding company) are not met; and a debit still arises despite an arrangement affecting the company’s shares that has a purpose or effect of defeat- ing the intent and application of the resident sharehold- ing requirements.
Debit date The debit date is the day on which the shareholding threshold is ﬁrst reached or passed.
Deﬁned in this Act: amount, arrangement, company, CTR account, CTR com- pany, CTR credit, CTR debit, direct market value circumstance, direct mar- ket value interest, direct voting interest, dividend, liquidation, resident in New Zealand, share, shareholder, shares of the same class, tax year Compare: 2004 No 35 s MI 5(1)(e), (2)(e), (3)–(6) Section OD 16(3)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 427(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(5) OD 17 CTRA breach of CTR ratio Debit A CTR company has a CTR debit for a tax year for a breach of the benchmark dividend rules in section OD 21 for an amount calculated using the formula— (net dividends × CTR ratio) – credits attached.
Deﬁnition of items in formula In the formula,— (a) net dividends is the total amount of all dividends paid by the company during the tax year, excluding imput- ation credits and CTR credits attached to the dividends: CTR ratio is the maximum permitted ratio calculated under section OA 18(2) (Calculation of maximum per- mitted ratios) or, if less, the greatest CTR ratio of a divi- dend paid by the company during the tax year: credits attached is the total amount of all CTR credits attached to dividends paid by the company during the tax year.
(b) (c) (1) (2) 2024 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OD 18 (3) (4) (5) (6) Table reference The CTR debit in subsection (1) is referred to in table O6: CTR debits, row 9 (breach of CTR ratio).

No FDP debit If a CTR company has a debit under this section, no debit arises for the amount in the company’s FDP account.

Ratio change declaration A debit under subsection (1) does not arise if the CTR com- pany provides a ratio change declaration under section OD 21(6).
Debit date The debit date is the last day of the tax year in which the breach occurred.
Deﬁned in this Act: amount, benchmark dividend, company, CTR account, CTR company, CTR credit, CTR debit, CTR ratio, dividend, FDP account, im- putation credit, tax year Compare: 2004 No 35 ss MG 8(4), MI 5(1)(c), (2)(c) OD 18 CTRA tax advantage arrangement (1) (2) (3) Debit A CTR company has a CTR debit for the amount of a debit for a tax advantage arrangement determined under sections GB 35 and GB 36 (which relate to imputation arrangements to obtain a tax advantage), which apply to a CTR credit as if it were an FDP credit.
Table reference The CTR debit in subsection (1) is referred to in table O6: CTR debits, row 10 (tax advantage arrangement).

Debit date The debit date is the last day of the tax year in which the tax advantage arrangement began.
Deﬁned in this Act: amount, arrangement, CTR company, CTR debit, tax ad- vantage, tax year Compare: 2004 No 35 ss MI 5(1)(d), (2)(d), MI 9 2025 Part O s OD 19 Income Tax Act 2007 Reprinted as at 1 January 2010 OD 19 CTRA ﬁnal balance (1) (2) (3) Debit A CTR company has a CTR debit for a credit balance in the account when the company stops being a CTR company.

Table reference The CTR debit in subsection (1) is referred to in table O6: CTR debits, row 11 (ﬁnal balance).
Debit date The debit date is the day before the company stops being a CTR company.

Deﬁned in this Act: CTR company, CTR debit Compare: 2004 No 35 s MI 5(1)(h), (2)(g) CTR credits attached to dividends OD 20 CTR credits attached to dividends Attaching CTR credits (1) When a CTR company pays a dividend to a non-resident share- holder, it may attach a CTR credit to the dividend.

Subsection (2) overrides this subsection.


(2) Dividends of producer boards and co-operative companies Subsection (1) does not apply to a dividend with a CTR credit attached that is subject to an election by— (a) a statutory producer board under sections OB 73 to OB 75 (which relate to producer boards’ notional distribu- tions); and a co-operative company under sections OB 78 to OB 80 (which relate to co-operative companies’ notional distributions).
(b) (3) CTR ratio for dividend A dividend with a CTR credit attached has a CTR ratio calcu- lated using the formula— Deﬁnition of items in formula In the formula,— (4) 2026 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OD 21 (5) (6) (a) (b) credit attached is the amount of CTR credit attached to the dividend: net dividends is the amount of the dividend paid, ex- cluding the amount of imputation credit and CTR credit.
Maximum permitted ratio A CTR credit attached to a dividend must not be more than the maximum permitted ratio calculated under section OA 18(2) (Calculation of maximum permitted ratios).

Residence Residence for the purposes of this section is ascertained under sections YD 9 to YD 11 (which relate to the residence of CTR companies).
Deﬁned in this Act: amount, CTR company, CTR credit, CTR ratio, co-opera- tive company, dividend, imputation credit, maximum permitted ratio, non-resi- dent, pay, shareholder, statutory producer board Compare: 2004 No 35 ss MG 8(1), (8), MI 7(2), MI 8(1) OD 21 CTRA benchmark dividend rules (1) (2) (3) (4) When this section applies This section applies when a CTR company pays a dividend on more than 1 occasion during a tax year.

Subsection (2) overrides this subsection.


Exclusions This section does not apply to a dividend with a CTR credit attached that is subject to an election by— (a) a statutory producer board under sections OB 73 to OB 75 (which relate to producer boards’ notional distribu- tions); and a co-operative company under sections OB 78 to OB 80 (which relate to co-operative companies’ notional distributions).

(b) Benchmark dividend The ﬁrst dividend of the tax year is the benchmark dividend.
Same CTR ratio The CTR ratio of a dividend paid after the benchmark dividend must be the same as the CTR ratio of the benchmark dividend.

2027 Part O s OD 22 Income Tax Act 2007 Reprinted as at 1 January 2010 (5) (6) (7) (8) (9) Debit for breach of CTR ratio A breach of subsection (4) gives rise to a CTR debit under section OD 17 (table O6: CTR debits, row 9 (breach of CTR ratio)) for an amount calculated using the formula in OD 17(1).
Ratio change declaration A CTR company may notify the Commissioner that the divi- dend is not part of an arrangement to obtain a tax advantage by providing a ratio change declaration stating that the divi- dend is not part of an arrangement to which sections GB 35 and GB 36 (which relate to imputation arrangements to ob- tain a tax advantage) applies.

The company must provide the declaration before the dividend is paid, or by a later date if the Commissioner allows.
For the purposes of this subsection, the dividend must not be part of an arrangement to obtain a tax ad- vantage.

This subsection overrides subsection (5).

Consolidated group This section applies, modiﬁed as necessary, to a consolidated group as if it were a single company.
Group debit If the company is part of a consolidated group, a breach of a CTR ratio alternatively gives rise to a CTR debit under section OP 92 (Consolidated CTRA breach of CTR ratio) (table O24: CTR debits of consolidated groups, row 7 (breach of CTR ra- tio)).

Treatment of group dividends In the application of this section to a consolidated group, a dividend paid between group companies is disregarded.
Deﬁned in this Act: amount, arrangement, benchmark dividend, Com- missioner, company, CTR company, CTR credit, CTR debit, CTR ratio, consolidated group, co-operative company, dividend, notify, pay, statutory producer board, tax advantage, tax year Compare: 2004 No 35 ss MG 8(2), (3), (8), MI 8, MI 22(1)–(3) OD 22 CTR credits and imputation credits attached to dividends Attaching combined credits (1) When a CTR company pays a dividend, it may attach both a CTR credit and an imputation credit to the dividend.
2028 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OD 22 (2) (3) (4) (5) (6) (7) Combined ratio A dividend with combined credits attached has a combined imputation and CTR ratio calculated using the formula— Deﬁnition of items in formula In the formula in subsection (2),— (a) combined credits is the total amount of CTR credit and imputation credit attached to the dividend: net dividends is the amount of the dividend paid, ex- cluding the amount of CTR credit and imputation credit.
(b) Maximum permitted ratio A dividend with combined credits attached must not have a combined imputation and CTR ratio that is more than the maximum permitted ratio calculated under section OA 18(2) (Calculation of maximum permitted ratios).

Combined ratio breach A breach of the maximum ratio set out in subsection (4) gives rise to an excess credit amount that is calculated using the for- mula— net dividends × (combined ratio – maximum ratio).
Deﬁnition of items in formula In the formula in subsection (5),— (a) net dividends is the amount of the dividend paid, ex- cluding the amount of CTR credit and imputation credit: combined ratio is the combined imputation and CTR ratio of the dividend: maximum ratio is the maximum combined imputation and CTR ratio permitted under subsection (4).

(b) (c) Relationship with section OZ 8 Section OZ 8 (Attaching imputation credits and FDP credits: maximum permitted ratio) may apply to modify this section.
Deﬁned in this Act: amount, combined imputation and CTR ratio, company, CTR company, CTR credit, dividend, excess credit amount, imputation credit, maximum permitted ratio, pay Compare: 2004 No 35 ss MG 10, MI 7(1), MI 8(1) Section OD 22(7) heading: added, on 1 April 2008, by section 506 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
2029 Part O s OD 23 Income Tax Act 2007 Reprinted as at 1 January 2010 Section OD 22(7): added, on 1 April 2008, by section 506 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

Payment of FDP and refunds OD 23 FDP payable for CTR debits [Repealed] Section OD 23: repealed (with effect on 30 June 2009), on 6 October 2009, by section 428(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OD 24 FDP payable on resident’s restricted amalgamation [Repealed] Section OD 24: repealed (with effect on 30 June 2009), on 6 October 2009, by section 429(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OD 25 Refunds on transfers to CTR account (1) (2) Refund A CTR company has a refund for the amount of a CTR credit under section OD 6 (table O5: CTR credits, row 3 (transfer from FDP account)) in the company’s CTR account.
Application of refund The Commissioner may apply the refund to pay an amount due under the Inland Revenue Acts.

This subsection overrides subpart RM (Refunds).
Deﬁned in this Act: amount, Commissioner, CTR account, CTR company, CTR credit, Inland Revenue Acts Compare: 2004 No 35 s MI 11 Table O5: conduit tax relief credits Row Conduit tax relief Credit date credit Opening credit balance 1 April [Repealed] 1 2 2030 Further deﬁned section OA 7 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OD 25 3 4 5 6 Row Conduit tax relief Credit date credit Transfer from FDP account 31 March CTR credit attached to dividend derived day on which dividend is paid [Repealed] Further deﬁned section OD 6 section OD 7 Reversal of debit for tax advantage arrangement debit date of debit section OD 9 Table O5 row 2: repealed (with effect on 30 June 2009), on 6 October 2009, by section 430(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O5 row 5: repealed (with effect on 30 June 2009), on 6 October 2009, by section 430(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O6: conduit tax relief debits Row Conduit tax relief Debit date debit 1 2 3 4 Opening debit balance 1 April CTR credit attached to dividend paid day of payment [Repealed] Transfer of credit to group conduit tax relief account day of transfer Further deﬁned section OD 7 section OD 10 section OD 12 2031 Part O s OD 25 Income Tax Act 2007 Row Conduit tax relief Debit date Reprinted as at 1 January 2010 Further deﬁned section OD 13 section OD 14 day on which return of income with adjustment is ﬁled when shareholding ends when group relationship stops section OD 15 debit Adjustment for conduit relief Shareholding chain broken when non-resident shareholder disposes of shares Chain break when company stops being part of consolidated group Increase in resident shareholding by 34% or more day of shareholding change Debit for breach of CTR ratio 31 March 10 Debit for tax advantage arrangement last day of tax year in which arrangement began section OD 16 section OD 17 section OD 18 11 Final balance when CTR company status ends day of cessation section OD 19 Table O6 row 2: amended (with effect on 1 April 2008), on 6 October 2009, by section 431(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O6 row 3: repealed (with effect on 30 June 2009), on 6 October 2009, by section 431(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2032 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OE 2 Subpart OE—Branch equivalent tax accounts (BETA) Introductory provision OE 1 General rules for companies and other persons with branch equivalent tax accounts (1) (2) (3) (4) BETA company A company resident in New Zealand may choose to be a branch equivalent tax account (BETA) company with a branch equivalent tax account.
BETA person A person resident in New Zealand who is not a company may choose to be a BETA person with a branch equivalent tax ac- count.

General rules: BETA company The general rules on memorandum accounts set out in sections OA 2 and OA 3 (which relate to the treatment of memoran- dum accounts) apply to the branch equivalent tax account of a BETA company.
General rules: BETA person Sections OA 2 and OA 3 apply to a BETA person and their branch equivalent tax account as if references in those sections to a tax year were references to an income year.
Deﬁned in this Act: BETA company, BETA person, branch equivalent tax ac- count, company, income year, memorandum account, resident in New Zealand, tax year Compare: 2004 No 35 ss MF 1(1), MF 11(1) Companies with branch equivalent tax accounts Introductory provisions OE 2 Branch equivalent tax accounts of companies (1) Accounts A BETA company must maintain a branch equivalent tax ac- count for a tax year.
The account is a record of branch equiva- lent tax credits and branch equivalent tax debits that arise in the account during the tax year.

2033 Part O s OE 2 Income Tax Act 2007 Reprinted as at 1 January 2010 Credits [Repealed] [Repealed] Debits [Repealed] [Repealed] Consolidated groups A consolidated group has a branch equivalent tax account if a group company is a BETA company, or if the group chooses to have the account.
Group credits and debits Certain credits and debits arise in the branch equivalent tax account of a consolidated group and not in the account of a group company.

Shareholder continuity requirement The carrying forward of a credit or a debit in the company’s branch equivalent tax account is subject to the shareholder continuity requirement of section OA 8 (Shareholder continu- ity requirements for memorandum accounts).
Relationship with section OZ 16 Section OZ 16 (BETA reductions) may apply to modify the application of sections OE 6 to OE 16.
Deﬁned in this Act: amount, BETA company, branch equivalent tax account, branch equivalent tax credit, branch equivalent tax debit, CFC, consolidated group, dividend, FDP, foreign attributed income, income tax, pay, shareholder, tax year Compare: 2004 No 35 ss MF 1(3), MF 4(1)(a), (3)(a), (5), MF 7(1)(a), MF 9 Section OE 2(2) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 432(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OE 2(2): repealed (with effect on 30 June 2009), on 6 October 2009, by section 432(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OE 2(3) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 432(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OE 2(3): repealed (with effect on 30 June 2009), on 6 October 2009, by section 432(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OE 2(7) heading: added, on 1 April 2008, by section 507 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(2) (3) (4) (5) (6) (7) 2034 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OE 4 Section OE 2(7): added, on 1 April 2008, by section 507 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
OE 3 Choosing to become BETA company (1) (2) (3) Election A company may choose to become a BETA company for a tax year— (a) (b) at any time during the tax year; or no later than the day on which the company is required to ﬁle a return of income for the tax year; or by a later date if the Commissioner allows.
(c) Notifying Commissioner The company must notify the Commissioner of an election under subsection (1)— (a) (b) no later than 21 days after the date of the election; or by a later date if the Commissioner allows.

Effect of election A BETA company must maintain a branch equivalent tax ac- count referred to in section OE 2(1) from the ﬁrst day of the tax year in which the company makes the election.
Deﬁned in this Act: BETA company, branch equivalent tax account, Commis- sioner, company, income year, notify, return of income, tax year Compare: 2004 No 35 s MF 1(1), (2) OE 4 When company stops being BETA company (1) (2) Election A BETA company may choose to stop being a BETA com- pany only in a tax year that is later than the tax year in which the company chooses under section OE 3 to become a BETA company.
When company’s status ends The company ends its status as a BETA company from the ﬁrst day of the tax year after the tax year in which it makes the election but only if it ﬁles an annual imputation credit account (ICA) return for the year of election in the time allowed by section 69 of the Tax Administration Act 1994.
Deﬁned in this Act: annual ICA return, BETA company, tax year Compare: 2004 No 35 s MF 1(4), (5) 2035 Part O s OE 5 Income Tax Act 2007 Reprinted as at 1 January 2010 OE 5 Treatment of attributed CFC income and FIF income in this subpart This subpart applies to a person with an attributing interest in a foreign investment fund (FIF) by treating— (a) FIF income derived from the person’s interest as at- tributed CFC income, if the FIF income is calculated— under the accounting proﬁts method or the (i) branch equivalent method; or under a method to which section EX 50(6) or EX 58 (which relate to the calculation of FIF income) applies; and the fund as a CFC; and the interest as an income interest.
(b) (c) Deﬁned in this Act: accounting proﬁts method, attributed CFC income, attribut- ing interest, branch equivalent method, CFC, FIF, FIF income, income interest Compare: 2004 No 35 s MF 15 (ii) Branch equivalent tax credits OE 6 BETA payment of income tax on foreign income Credit A BETA company has a branch equivalent tax credit for an amount calculated using the formula— ((CFC income for year – deductions for year) × tax rate) – foreign tax credits – debit balances.
Deﬁnition of items in formula In the formula,— (a) CFC income for year is the amount of attributed CFC income derived during the income year corresponding to the tax year referred to in subsection (3): deductions for year is the total amount in the income year corresponding to the tax year referred to in subsec- tion (3) of— (i) (ii) (iii) (iv) tax rate is the basic rate of income tax set out in— attributed CFC loss; and attributed CFC net loss; and FIF loss; and FIF net loss: (b) (c) (1) (2) 2036 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OE 7 (i) (ii) schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) if the company is not a Maori authority; or schedule 1, part A, clause 7 if the company is a Maori authority: foreign tax credits is the amount of foreign tax credits allowed for the income year corresponding to the tax year referred to in subsection (3) under sections LK 1 to LK 7 (which relate to foreign tax credits of CFCs), as applicable: debit balances is the total amount of all debit balances in a branch equivalent tax account applied to satisfy the company’s income tax liability for the income year corresponding to the tax year referred to in subsection (3).
(d) (e) (3) (4) Table reference The branch equivalent tax credit in subsection (1) is referred to in table O7: branch equivalent tax credits, row 2 (income tax on foreign income).

Credit date The credit date is the day the company ﬁles the return of in- come for the tax year.
Deﬁned in this Act: amount, attributed CFC income, attributed CFC loss, at- tributed CFC net loss, basic rate, BETA company, branch equivalent tax ac- count, branch equivalent tax credit, FIF loss, FIF net loss, foreign tax, income tax, income tax liability, income year, Maori authority, tax year Compare: 2004 No 35 s MF 4(1)(a), (2)(a) Section OE 6(2)(c)(i): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OE 7 BETA payment of income tax (1) When this section applies This section applies when— (a) a BETA company has a debit balance in its branch equivalent tax account; and the income of the company includes an amount of at- tributed CFC income; and (b) 2037 Part O s OE 7 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) an amount of FDP that gives rise to a debit included in the debit balance has been paid— (i) (ii) (iii) directly; or by reducing a tax loss; or to reduce an FDP liability under section RG 7 (Reduction of payments for conduit tax relief).
Group companies This section also applies in relation to a BETA company if another company (company B) that is part of the same group of companies has a debit balance in its branch equivalent tax account that arises in the circumstances set out in subsection (1).

Election The company or company B may choose to apply some or all of the debit balance under section BC 8 (Satisfaction of income tax liability) to satisfy an income tax liability in relation to the attributed CFC income.
The election is made by recording a credit in the branch equivalent tax account with the debit balance.

(2) (3) Maximum amount (3B) Despite subsection (3) and section OP 101(2) (Consolidated BETA payment of income tax), the amount that may be ap- plied to satisfy the income tax liability must be no more than the amount calculated for the company that has the attributed CFC income under section OE 6(1), treating the item debit balances as zero.
Credit The amount that is applied to satisfy the income tax liability is a branch equivalent tax credit in the branch equivalent tax ac- count of the company that made the election under subsection (3).

Table reference The branch equivalent tax credit in subsection (4) is referred to in table O7: branch equivalent tax credits, row 3 (payment of income tax).
Unused portion treated as tax loss component If the amount that is applied to satisfy the income tax liability for attributed CFC income calculated under subsection (8) is (4) (5) (6) 2038 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OE 7 more than the total income tax liability, the unused portion is treated as a tax loss component of the company of an amount calculated using the formula— (7) (8) (9) Deﬁnition of item in formula In the formula, tax rate is the basic rate of income tax set out in— (a) schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts), if the company is not a Maori authority; or schedule 1, part A, clause 7, if the company is a Maori authority.
(b) Income tax paid For the purposes of this section, the income tax liability — (a) is calculated by applying the formula in section OE 6(1) on the basis that the item debit balances is zero: is satisﬁed to the extent to which the liability is no more than the income tax payable in relation to the amount of the attributed CFC income.

(b) Credit date The credit date is the day of election.
Deﬁned in this Act: amount, attributed CFC income, basic rate, BETA company, branch equivalent tax account, branch equivalent tax credit, branch equivalent tax debit, company, consolidated group, dividend, FDP, income, income interest, income tax, income tax liability, income year, Maori authority, pay, tax loss component, tax year Compare: 2004 No 35 ss MF 4(1)(c), (2)(b), MF 5(4)–(7) Section OE 7(2): amended, on 1 April 2008, by section 508(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OE 7(3B) heading: inserted, on 1 April 2008, by section 508(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OE 7(3B): inserted, on 1 April 2008, by section 508(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OE 7(4): amended, on 1 April 2008, by section 508(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OE 7(7)(a): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
2039 Part O s OE 8 Income Tax Act 2007 Reprinted as at 1 January 2010 OE 8 BETA unused amount of debit balance When this section applies This section applies for the purposes of section OE 7 when an income tax liability of a BETA company is satisﬁed by apply- ing a debit balance in the company’s branch equivalent tax ac- count, or in the account of another company in the same group of companies, and an unused portion of the debit balance re- mains after the income tax liability is satisﬁed.
Conversion to tax loss The unused amount is converted into a tax loss component for the purposes of sections IA 2 to IA 10 (which relate to the treatment of tax losses).
The amount of the tax loss component is calculated using the formula— Deﬁnition of items in formula In the formula,— (a) (b) unused amount is the amount of the debit balance re- maining in the branch equivalent tax account: tax rate is the basic rate of income tax set out in— (i) schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) if the company is not a Maori authority; or schedule 1, part A, clause 7 if the company is a Maori authority.
(ii) Company’s tax loss The company that has the tax loss is the company whose in- come tax liability is satisﬁed as set out in section OE 7(3).
Deﬁned in this Act: amount, attributed CFC income, basic rate, BETA com- pany, branch equivalent tax account, consolidated group, income tax, income tax liability, Maori authority, pay, tax loss component Compare: 2004 No 35 ss MF 4(1)(c), MF 5(4)–(7) Section OE 8(1): amended, on 1 April 2008, by section 509 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OE 8(3)(b)(i): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

(1) (2) (3) (4) 2040 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OE 10 OE 9 BETA refund of FDP (1) (2) (3) (4) Credit A BETA company has a branch equivalent tax credit for the amount of a refund of FDP paid to the company.

Subsections (2) and (3) override this subsection.


Refund giving rise to debit A refund under subsection (1) must be a refund of a payment of FDP that gave rise to a debit under section OE 12.
Reduction The amount of the credit under subsection (1) is reduced to the extent to which— (a) the payment of FDP is made before a branch equivalent tax credit arises under section OE 10 in the company’s branch equivalent tax account; and the amount of the refund is no more than the amount of the credit for loss of shareholder continuity.
(b) Table references The table references are as follows (a) the branch equivalent tax credit in subsection (1) is re- ferred to in table O7: branch equivalent tax credits, row 4 (refund of FDP): the branch equivalent tax debit in subsection (2) is re- ferred to in table O8: branch equivalent tax debits, row 2 (payment of FDP): the branch equivalent tax credit in subsection (3)(a) is referred to in table O7: branch equivalent tax credits, row 5 (credit for loss of shareholder continuity).
(b) (c) (5) Credit date The credit date is the day the refund is made.
Deﬁned in this Act: amount, BETA company, branch equivalent tax account, branch equivalent tax credit, branch equivalent tax debit, FDP, pay, shareholder Compare: 2004 No 35 s MF 4(1)(d), (2)(c) OE 10 BETA credit for loss of shareholder continuity (1) Credit A BETA company has a branch equivalent tax credit for the amount of a branch equivalent tax debit retained in the branch 2041 Part O s OE 11 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) equivalent tax account and unused at the time at which share- holder continuity is lost.
Table reference The branch equivalent tax credit in subsection (1) is referred to in table O7: branch equivalent tax credits, row 5 (credit for loss of shareholder continuity).

When credit arises The credit arises at the time shareholder continuity is lost.

Avoidance arrangements Section GB 40 (BETA arrangements for carrying amounts forward) may exclude a company from the application of this section.
Deﬁned in this Act: amount, BETA company, branch equivalent tax account, branch equivalent tax credit, branch equivalent tax debit, shareholder Compare: 2004 No 35 s MF 4(1)(e), (2)(d), (5), (6) Section OE 10(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 91(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section OE 10(3) heading: substituted (with effect on 1 April 2008), on 7 De- cember 2009, by section 91(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section OE 10(3): substituted (with effect on 1 April 2008), on 7 December 2009, by section 91(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
OE 11 BETA ﬁnal balance (1) (2) Credit A BETA company has a branch equivalent tax credit for a debit balance in the branch equivalent tax account when the company stops being resident in New Zealand.

Table reference The branch equivalent tax credit in subsection (1) is referred to in table O7: branch equivalent tax credits, row 6 (ﬁnal bal- ance).
2042 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OE 15 (3) Credit date The credit date is the day the company stops being resident in New Zealand.
Deﬁned in this Act: BETA company, branch equivalent tax account, branch equivalent tax credit, resident in New Zealand Compare: 2004 No 35 s MF 4(1)(f), (2)(e) Branch equivalent tax debits [Repealed] Heading: repealed (with effect on 30 June 2009), on 6 October 2009, by sec- tion 433(1) the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OE 12 BETA payment of FDP [Repealed] Section OE 12: repealed (with effect on 30 June 2009), on 6 October 2009, by section 433(1) the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

OE 13 BETA reduction in FDP [Repealed] Section OE 13: repealed (with effect on 30 June 2009), on 6 October 2009, by section 433(1) the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
OE 14 BETA refund of income tax [Repealed] Section OE 14: repealed (with effect on 30 June 2009), on 6 October 2009, by section 434(1) the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

OE 15 BETA debit for loss of shareholder continuity [Repealed] Section OE 15: repealed (with effect on 30 June 2009), on 6 October 2009, by section 434(1) the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
2043 Part O s OE 16 Income Tax Act 2007 Reprinted as at 1 January 2010 OE 16 BETA ﬁnal balance [Repealed] Section OE 16: repealed (with effect on 30 June 2009), on 6 October 2009, by section 434(1) the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Debit if credit balance at beginning of ﬁrst affected income year OE 16B Company with credit balance at beginning of ﬁrst affected income year If a BETA company has a credit balance in its branch equiva- lent tax account at the beginning of the ﬁrst income year for which this section applies to the company, a branch equivalent tax debit of an amount equal to the credit balance arises in the branch equivalent tax account at that time.
Deﬁned in this Act: BETA company, branch equivalent tax account, branch equivalent tax debit, company, income year Section OE 16B: inserted (with effect on 30 June 2009), on 6 October 2009, by section 435(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Persons with branch equivalent tax accounts Introductory provisions OE 17 Person choosing to become BETA person Election A person who is eligible under section OE 1(2) and who chooses to become a BETA person may make the election for an income year— (a) (b) at any time during the income year; or no later than the day on which the person is required to ﬁle a return of income for the income year; or by a later date if the Commissioner allows.
(c) Notice The person must notify the Commissioner of the election under subsection (1)— (a) (b) no later than 21 days after the election; or by a later date if the Commissioner allows.

(1) (2) 2044 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OE 19 (3) Effect of election A BETA person must maintain a branch equivalent tax account from the ﬁrst day of the income year in which they make the election.
Deﬁned in this Act: BETA person, branch equivalent tax account, Commis- sioner, income year, notify, return of income Compare: 2004 No 35 s MF 11(1), (2) OE 18 When person stops being BETA person (1) (2) (3) Election A BETA person may choose to stop the branch equivalent tax account.

When election made A person may make an election under subsection (1) only in an income year that is later than the income year in which the person chose under section OE 1(2) to become a BETA person.
When person’s status ends The person ends their status as a BETA person from the ﬁrst day of the income year after the income year in which the election referred to in subsection (1) is made but only if they ﬁle an annual branch equivalent tax account return for the year of election in the time allowed by section 78(3) of the Tax Administration Act 1994.
Deﬁned in this Act: annual branch equivalent tax account return, BETA person, branch equivalent tax account, income year Compare: 2004 No 35 s MF 13(1), (2) Branch equivalent tax credits OE 19 BETA person’s payment of income tax on foreign income (1) Credit A BETA person has a branch equivalent tax credit for an in- come year for an amount calculated using the formula— Deﬁnition of items in formula In the formula,— (2) 2045 Part O s OE 20 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) (c) (d) tax liability is the person’s income tax liability for the income year: CFC or taxable income is the lesser of the person’s— attributed CFC income derived during the in- (i) come year; or taxable income for the income year: (ii) taxable income is the person’s taxable income for the income year: foreign tax credits is the foreign tax credits allowed for the income year under sections LK 1 to LK 7 (which relate to tax credits relating to attributed CFC income).
Table reference The branch equivalent tax credit in subsection (1) is referred to in table O9: person’s branch equivalent tax credits, row 2 (payment of income tax on foreign income).

Credit date The credit date is the day the person ﬁles the return of income for the tax year corresponding to the income year.
Deﬁned in this Act: amount, attributed CFC income, BETA person, branch equivalent tax account, branch equivalent tax credit, foreign tax, income tax, income tax liability income year, return of income, tax year, taxable income Compare: 2004 No 35 ss MF 13(1), (2), MF 14 (3) (4) Branch equivalent tax debits OE 20 BETA person’s payment of income tax Election On meeting the requirements of subsection (4), a BETA per- son may choose to use some or all of a credit balance in their branch equivalent tax account to satisfy an income tax liability of the person for an income year.
Debit The amount used to satisfy the income tax liability is a branch equivalent tax debit in the person’s branch equivalent tax ac- count.

Table reference The branch equivalent tax debit in subsection (2) is referred to in table O10: person’s branch equivalent tax debits, row 2 (payment of income tax).
(1) (2) (3) 2046 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OE 21 (4) (5) (6) (7) Requirements The person may make an election under subsection (1) if— (a) they derive a dividend from an income interest in a CFC during the income year; and a credit balance exists in their branch equivalent tax account; and they have paid the income tax giving rise to a credit included in the credit balance.
(b) (c) Manner of election The person makes the election by recording the amount as a debit in the branch equivalent tax account.

Income tax paid Once the election is made, the income tax liability is satisﬁed to the extent to which the liability is no more than the income tax payable on the amount of the dividend derived.

Debit date The debit date is the day of election.
Deﬁned in this Act: amount, BETA person, branch equivalent tax account, branch equivalent tax debit, CFC, dividend, income interest, income tax, in- come tax liability, income year, pay Compare: 2004 No 35 ss MF 13(3)(a), MF 14 OE 21 BETA person’s refund of income tax (1) (2) (3) Debit A BETA person has a branch equivalent tax debit for an in- come year for the amount of a refund of income tax attributable to income tax paid for the income year on attributed CFC in- come derived during the income year.
Table reference The branch equivalent tax debit in subsection (1) is referred to in table O10: person’s branch equivalent tax debits, row 3 (refund of income tax).

Debit date The debit date is the day the refund is made.
Deﬁned in this Act: amount, attributed CFC income, BETA person, branch equivalent tax debit, income tax, income year, pay Compare: 2004 No 35 s MF 13(3)(b) 2047 Part O s OE 22 Income Tax Act 2007 Reprinted as at 1 January 2010 OE 22 BETA person’s ﬁnal balance (1) (2) (3) Debit A BETA person has a branch equivalent tax debit for a credit balance in the branch equivalent tax account when the person stops being resident in New Zealand.
Table reference The branch equivalent tax debit in subsection (1) is referred to in table O10: person’s branch equivalent tax debits, row 4 (ﬁnal balance).

Debit date The debit date is the day the person stops being resident in New Zealand.
Deﬁned in this Act: BETA person, branch equivalent tax account, branch equivalent tax debit, resident in New Zealand Compare: 2004 No 35 s MF 13(3)(c) Table O7 branch equivalent tax credits Row Branch equivalent tax Credit date credit Opening credit balance 1 April Further deﬁned section OA7 [Repealed] Debit balance applied to satisfy income tax liability day of election section OE 7 Refund of FDP day of refund section OE 9 Credit for loss of shareholder continuity time of loss of continuity section OE 10 Debit balance when company stops being resident in New Zealand day of cessation section OE 11 2048 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OE 22 Table O7 row 2: repealed (with effect on 30 June 2009), on 6 October 2009, by section 436(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O7 row 5: amended (with effect on 1 April 2008), on 7 December 2009, by section 92 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Table O8 branch equivalent tax debits [Repealed] Table O8: repealed (with effect on 30 June 2009), on 6 October 2009, by section 437(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O9 person’s equivalent tax credits Row Branch equivalent tax Credit date credit 1 2 Opening credit balance 1 April Income tax paid on foreign income derived in income year day on which return of income for income year is ﬁled Further deﬁned section OA 7 section OE 19 Table O10 person’s equivalent tax debits Row Branch equivalent tax Credit date credit 1 2 Opening debit balance 1 April Credit balance applied to satisfy income tax liability day of election Further deﬁned section OA 7 section OE 20 2049 Part O s OF 1 Income Tax Act 2007 Reprinted as at 1 January 2010 3 4 Refund of income tax for attributed CFC income Credit balance when New Zealand residence ends day of refund section OE 21 day of cessation section OE 22 Subpart OF—Available subscribed capital accounts (ASCA) Introductory provisions OF 1 General rules for companies with ASC accounts (1) (2) (3) (4) ASC account company A public unit trust or a group investment fund that derives category A income may choose to become an available sub- scribed capital (ASC) account company.
This subsection does not apply to a portfolio tax rate entity.

ASC account An ASC account company must maintain an ASC account for a tax year.

The account is a record of ASC credits and ASC debits that arise in the account during the tax year.

Credits Credits to the account include redemption proceeds that are less than the ASC company’s available subscribed capital cal- culated under the slice rule.
Debits Debits to the account include a transfer of a credit balance to the company’s imputation credit account.
Deﬁned in this Act: ASC account, ASC account company, ASC credit, ASC debit, available subscribed capital, category A income, group investment fund, imputation credit account, portfolio tax rate entity, public unit trust, slice rule, tax year Compare: 2004 No 35 ss MJ 1(1), MJ 5(1), MJ 6(1) OF 2 ASC accounts The general rules on memorandum accounts set out in sections OA 2 and OA 3 (which relate to the treatment of memorandum 2050 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OF 4 accounts) apply to the ASC account of an ASC account com- pany.
Deﬁned in this Act: ASC account, ASC account company, memorandum ac- count Compare: 2004 No 35 s MJ 3(1) OF 3 Choosing to become ASC account company (1) (2) (3) Election A company may choose to become an ASC account company if— (a) it is a public unit trust or a group investment fund that derives category A income; and it has issued shares on terms that their redemption will be subject to section CD 22(4) (Returns of capital: off- market share cancellations).
(b) Notifying Commissioner A company that makes an election under subsection (1) must notify the Commissioner of the election no later than the day on which the company is required to ﬁle a return of income for the tax year that corresponds to the income year in which the election is made.

Effect of election An ASC account company must maintain the ASC account re- ferred to in section OF 1(2) from the day the company chooses to become an ASC account company.
Deﬁned in this Act: ASC account company, category A income, Commissioner, company, group investment fund, income year, notify, public unit trust, return of income, share, tax year Compare: 2004 No 35 s MJ 1(1) OF 4 ASCA redemption credit ASC credits (1) Credit An ASC account company has an ASC credit when the com- pany redeems a share in the company for an amount calculated using the formula— ASC amount – redemption proceeds.
2051 Part O s OF 5 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) (5) Deﬁnition of items in formula In the formula,— (a) ASC amount is the amount of the available subscribed capital for the redemption calculated under section CD 22(4) (Returns of capital: off-market share cancella- tions): redemption proceeds is the amount of the proceeds from the redemption calculated under sections CD 4 to CD 6 (which relate to the nature of a dividend).
(b) Positive result If the result of the formula in subsection (1) is negative, the amount is treated as zero.

Table reference The ASC credit in subsection (1) is referred to in table O11: ASC credits, row 2 (redemption credit).

Credit date The credit date is the day the company redeems the share.
Deﬁned in this Act: amount, ASC account, ASC account company, ASC credit, available subscribed capital, share Compare: 2004 No 35 s MJ 5 OF 5 ASCA transfer to imputation credit account ASC debits Election An ASC account company may choose that some or all of the credit balance in the company’s ASC account is transferred to the company’s imputation credit account.
Debit and credit The amount of the credit balance transferred is— (a) an ASC debit for the full amount of the credit balance transferred; and an imputation credit under section OB 18 (ICA trans- fer from ASC account) for the amount calculated under subsection (4).

(b) Table references The ASC debit in subsection (2)(a) is referred to in table O12: ASC debits, row 2 (transfer to imputation credit account).
The (1) (2) (3) 2052 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OF 5 (4) (5) (6) (7) (8) imputation credit in subsection (2)(b) is referred to in table O1: imputation credits, row 16 (transfer from ASC account).

Amount The amount of the credit to the imputation credit account is calculated using the formula— credit balance × maximum imputation ratio.
Deﬁnition of items in formula In the formula,— (a) credit balance is some or all of the credit balance in the company’s ASC account that the ASC account com- pany chooses to use: maximum imputation ratio is the maximum permit- ted ratio calculated under section OA 18(2) (Calculation of maximum permitted ratios).

(b) Timing of election An election under subsection (1) may be made at any time when the company is an imputation credit account (ICA) com- pany.
Manner of election A company makes an election under subsection (1) by record- ing the credit balance transferred as— (a) (b) a debit in the company’s ASC account; and a credit in the company’s imputation credit account.

Debit date The debit date is— (a) (b) the day of election; or the day before the company stops being an ICA com- pany if the election is made on the occasion of cessa- tion.
Deﬁned in this Act: amount, ASC account, ASC account company, ASC debit, ICA company, imputation credit, imputation credit account, imputation ratio Compare: 2004 No 35 ss ME 4(1)(da), MJ 6 2053 Part O s OJ 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Table O11 ASC credits Row ASC credit Credit date 1 2 Opening credit balance 1 April Amount by which ASC is more than proceeds on redemption of shares day on which shares are redeemed Table O12 ASC debits Row ASC credit Credit date 1 2 Opening debit balance 1 April Transfer of credit balance to imputation credit account set out in section OF 5 Further deﬁned section OA 7 section OF 4 Further deﬁned section OA 7 section OF 5 Subpart OJ—Policyholder credit accounts (PCA) Introductory provision OJ 1 General rules for companies and other persons with policyholder credit accounts PCA company A company resident in New Zealand and carrying on a life in- surance business is a policyholder credit account (PCA) com- pany.
PCA person A person other than a PCA company who carries on a life in- surance business and has policyholder income to which sec- tion CR 1(4) (Income of life insurer) applies, may choose to have a policyholder credit account.
(1) (2) 2054 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OJ 2 (3) (4) General rules: PCA company The general rules on memorandum accounts set out in sections OA 2 and OA 3 (which relate to the treatment of memorandum accounts) apply to a PCA company’s policyholder credit ac- count.

General rules: PCA person Sections OA 2 and OA 3 apply to a PCA person and their policyholder credit account as if references in those sections to a tax year were references to an income year.
Deﬁned in this Act: business, company, income year, life insurance, memoran- dum account, PCA company, PCA person, policyholder credit account, policy- holder income, resident in New Zealand, tax year Compare: 2004 No 35 ss ME 15, ME 21, ME 22(1) Companies with policyholder credit accounts Introductory provision OJ 2 Policyholder credit accounts of companies (1) (2) (3) (4) Accounts A PCA company must maintain a policyholder credit account for a tax year.
The account is a record of policyholder credits and policyholder debits that arise in the account during the tax year.

Credits Credits to the account may include a transfer of an amount from the PCA company’s imputation credit account or foreign dividend payment (FDP) account.

Debits Debits to the account may include a credit balance applied to satisfy a PCA company’s policyholder base income tax liabil- ity.
Consolidated groups A consolidated group has a policyholder credit account if a group company is a PCA company.

2055 Part O s OJ 3 Income Tax Act 2007 Reprinted as at 1 January 2010 (5) Credit and debits arising in group accounts Certain credits and debits arise in the policyholder credit ac- count of the group and not in the account of a group company.
Deﬁned in this Act: amount, consolidated group, FDP account, imputation credit account, PCA company, policyholder base income tax liability, policy- holder credit, policyholder credit account, policyholder debit, tax year Compare: 2004 No 35 ss ME 15, ME 17(1), ME 27(1), (3) Policyholder credits of PCA company OJ 3 PCA transfer from imputation credit account Credit A PCA company has a policyholder credit for an amount equal to the amount of an imputation debit, as applicable,— (a) under section OB 47 (ICA transfer to policyholder credit account) if the company is not part of a consoli- dated group; or under section OP 44 (Consolidated ICA transfer to pol- icyholder credit account) if the company is part of a con- solidated imputation group.
(b) Table references The table references are as follows: (a) (b) (c) the policyholder credit in subsection (1) is referred to in table O13: policyholder credits, row 2 (transfer from imputation credit account): the imputation debit in subsection (1)(a) is referred to in table O2: imputation debits, row 20 (transfer to pol- icyholder credit account): the imputation debit in subsection (1)(b) is referred to in table O20: imputation debits of consolidated imput- ation groups, row 18 (transfer to policyholder credit ac- count).
Credit date The credit date is the same as the debit date recorded for the transfer in the imputation credit account.
Deﬁned in this Act: amount, consolidated group, imputation credit account, imputation debit, PCA company, policyholder credit Compare: 2004 No 35 ss ME 14(1), ME 18(1)(a), (2)(a) (1) (2) (3) 2056 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OJ 5 OJ 4 PCA transfer from FDP account (1) (2) (3) Credit A PCA company has a policyholder credit for an amount equal to the amount of an FDP debit under section OC 20 (FDPA transfer to policyholder credit account) for the transfer of a credit balance or the amount of a credit from the company’s FDP account.
Table references The policyholder credit in subsection (1) is referred to in table O13: policyholder credits, row 3 (transfer from FDP account).

The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 9 (transfer to policyholder credit account).

Credit date The credit date is the same as the debit date recorded for the transfer in the FDP account.
Deﬁned in this Act: amount, FDP account, FDP debit, PCA company, policy- holder credit Compare: 2004 No 35 s ME 18(1)(b), (2)(b) OJ 5 PCA transfer of life insurance business (1) (2) (3) (4) When this section applies This section applies when a PCA company or a PCA person transfers a life insurance business to another PCA company.

Credit The PCA company that is the transferee has a policyholder credit for an amount equal to an amount of a policyholder debit under section OJ 11.
Table reference The policyholder credit in subsection (2) is referred to in table O13: policyholder credits, row 4 (transfer of life insurance business).

Credit date The credit date is the day the life insurance business is trans- ferred.
Deﬁned in this Act: amount, business, life insurance, PCA company, PCA per- son, policyholder credit, policyholder credit account, policyholder debit Compare: 2004 No 35 s ME 18(1)(c), (2)(c) 2057 Part O s OJ 6 Income Tax Act 2007 Reprinted as at 1 January 2010 OJ 6 PCA credit for maximum deﬁcit in FDP account (1) (2) (3) Credit A PCA company has a policyholder credit for a tax year for an amount equal to the amount of an FDP debit— (a) that arises in the company’s FDP account under section OC 23 (FDPA breach of FDP ratio by PCA company); and whose amount is calculated under sections OC 23 and OC 36 (Meaning of maximum deﬁcit debit).
(b) Table references The policyholder credit in subsection (1) is referred to in table O13: policyholder credits, row 5 (credit for maximum deﬁcit in FDP account).

The FDP debit in subsection (1)(a) is re- ferred to in table O4: FDP debits, row 12 (breach of FDP ratio by PCA company).

Credit date The credit date is the last day of the tax year.
Deﬁned in this Act: amount, FDP account, FDP debit, FDP ratio, PCA com- pany, policyholder credit, tax year Compare: 2004 No 35 s ME 18(1)(bb), (2)(bb) OJ 7 PCA credit for reduced deﬁcit in FDP account Credit A PCA company has a policyholder credit for a tax year for an amount equal to the amount of an FDP debit— (a) that arises in the company’s FDP account under section OC 23 (FDPA breach of FDP ratio by PCA company); and whose amount is calculated under sections OC 23 and OC 38 (Meaning of reduced deﬁcit debit).
(b) Table references The policyholder credit in subsection (1) is referred to in table O13: policyholder credits, row 6 (credit for reduced deﬁcit in FDP account).

The FDP debit in subsection (1)(a) is referred to in table O4: FDP debits, row 12 (breach of FDP ratio by PCA company).

(1) (2) 2058 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OJ 8 (3) Credit date The credit date is the last day of the tax year.
Deﬁned in this Act: amount, FDP account, FDP debit, FDP ratio, PCA com- pany, policyholder credit, tax year Compare: 2004 No 35 s ME 18(1)(bc), (2)(bb) Policyholder debits of PCA company OJ 8 PCA payment of tax relating to policyholder base (1) (2) (3) (4) (5) Election A PCA company may choose that some or all of a credit bal- ance in the company’s policyholder credit account is treated as applied to satisfy— (a) a policyholder base income tax liability of the company; or a provisional tax liability of the company for its policy- holder base.
(b) Manner of election A company makes an election under subsection (1) by record- ing as a debit the balance applied to satisfy the policyholder base income tax liability or policyholder base provisional tax.

Effect of election As a result of an election under this section,— (a) a policyholder debit arises in the company’s policy- holder credit account; and the company’s liability for the income tax or provisional tax is satisﬁed.
(b) Table reference The policyholder debit in subsection (3) is referred to in table O14: policyholder debits, row 2 (payment of tax relating to policyholder base).

Debit date The debit date is the last day of the company’s income year corresponding to the tax year for which the policyholder base income tax liability or policyholder base provisional tax arises.
Deﬁned in this Act: amount, income tax, income year, pay, PCA company, policyholder base, policyholder base income tax liability, policyholder credit account, policyholder debit, provisional tax, tax year Compare: 2004 No 35 ss ME 18(3)(a), (4)(a), ME 19(1), (2) 2059 Part O s OJ 9 Income Tax Act 2007 Reprinted as at 1 January 2010 OJ 9 PCA transfer to imputation credit account (1) (2) (3) (4) Election A PCA company may choose to treat some or all of a credit balance in the company’s policyholder credit account as trans- ferred to an imputation credit account.
Subsection (2) over- rides this subsection.

Exclusion An election under subsection (1) excludes an amount that arises when— (a) the company has adopted a non-standard accounting year; and during the accounting year, the company has made an election that means the credit balance includes a credit under section OJ 3 or OJ 4; and the election would result in a debit to the policyholder credit account during the tax year that corresponds to the accounting year.
(b) (c) (b) Debit and credit The amount of the credit balance transferred is— (a) a debit in the company’s policyholder credit account; and a credit under, as applicable,— (i) section OB 17 (ICA transfer from policyholder credit account) in the company’s imputation credit account; or section OP 20 (Consolidated ICA transfer from group company’s policyholder credit account) in the consolidated imputation group’s imputation credit account.
(ii) Table references The table references are as follows: (a) the policyholder debit in subsection (3)(a) is referred to in table O14: policyholder debits, row 3 (transfer to imputation credit account): the imputation credit in subsection (3)(b)(i) is referred to in table O1: imputation credits, row 15 (transfer from policyholder credit account): (b) 2060 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OJ 10 (c) the imputation credit in subsection (3)(b)(ii) is referred to in table O19: imputation credits of consolidated im- putation groups, row 15 (transfer from company’s pol- icyholder credit account).
Credit balance reduced Despite subsection (2)(b), the credit balance includes a credit that is cancelled by a later debit to the account.

Whether a debit cancels a credit is determined by treating a debit as offsetting a credit in the order in which credits arise in the account.
Other accounts The company may treat the amount of a credit balance that can be transferred as transferred to— (a) (b) the company’s imputation credit account; or the imputation credit account of an imputation group, if the company is part of the group.
Manner of election The company makes the election by recording the amount of the credit balance transferred as— (a) a debit in the company’s policyholder credit account; and a credit in the imputation credit account of, as applic- able,— (i) (ii) the company; or the imputation group.

(b) Debit date The debit date is the day of election.
Deﬁned in this Act: accounting year, amount, consolidated imputation group, FDP account, imputation credit, imputation credit account, imputation group, non-standard accounting year, PCA company, policyholder credit, policyholder credit account, tax year Compare: 2004 No 35 ss ME 18(3)(b), (4)(b), ME 19(3)–(6) (5) (6) (7) (8) OJ 10 PCA transfer to group account (1) Debit A PCA company has a policyholder debit in a tax year for an amount equal to the amount of a policyholder credit under section OP 112 (Consolidated PCA group company’s credit) 2061 Part O s OJ 11 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) for a credit transferred to the policyholder credit account of the consolidated group of which the company is part.
Table references The policyholder debit in subsection (1) is referred to in table O14: policyholder debits, row 4 (transfer to group account).

The policyholder credit in subsection (1) is referred to in table O27: policyholder credits of consolidated groups, row 4 (group company’s credit).

Debit date The debit date is the credit date recorded in the group account for the transfer.
Deﬁned in this Act: amount, consolidated group, PCA company, policyholder credit, policyholder credit account, policyholder debit, tax year Compare: 2004 No 35 s ME 27(2) OJ 11 PCA company’s transfer of life insurance business Election A PCA company may choose to transfer a credit balance in the company’s policyholder credit account to another person on the transfer of the company’s life insurance business to— (a) (b) another PCA company; or a PCA person.
Requirements A PCA company may make an election under subsection (1) if— (a) the transfer meets the requirements of section EY 45(1) (Policyholder income formula: when life insurance business transferred); and after the transfer, the company is no longer required to maintain a policyholder credit account.

(b) Debit As a result of the election, the PCA company that is the trans- feror has a debit for the amount of the credit balance trans- ferred under subsection (1).
Table reference The policyholder debit in subsection (3) is referred to in table O14: policyholder debits, row 5 (transfer of life insurance business).

(1) (2) (3) (4) 2062 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OJ 13 (5) (6) Manner of election The company makes the election by recording the amount of the credit balance transferred as a debit in the company’s pol- icyholder credit account.

Debit date The debit date is the day the life insurance business is trans- ferred.
Deﬁned in this Act: amount, business, life insurance, PCA company, PCA per- son, policyholder credit, policyholder credit account, policyholder debit Compare: 2004 No 35 ss ME 18(3)(c), (4)(c), ME 19A Persons with policyholder credit accounts Introductory provisions OJ 12 Choosing to become PCA person (1) (2) Notifying Commissioner A person who is eligible under section OJ 1(2) and who chooses to be a PCA person must notify the Commissioner of their election— (a) (b) no later than 21 days after the election; or by a later date if the Commissioner allows.
Effect of election A PCA person must maintain the policyholder credit account referred to in section OJ 1(2) from the start of the income year in which the PCA person makes the election.

Deﬁned in this Act: Commissioner, income year, notify, PCA person, policy- holder credit account Compare: 2004 No 35 s ME 21(1), (2) OJ 13 Choosing to stop being PCA person (1) (2) Election A PCA person may choose to stop being a PCA person.
When election made An election under subsection (1) may be made only in an in- come year that is later than the income year in which the person chooses to become a PCA person.
2063 Part O s OJ 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) When person’s status as PCA person ends The person ends their status as a PCA person from the start of the income year following the year of election but only if they ﬁle an annual PCA return for the year of election in the time allowed by section 66(3) of the Tax Administration Act 1994.
Deﬁned in this Act: annual PCA return, Commissioner, income year, PCA per- son Compare: 2004 No 35 s ME 21(3), (4) Policyholder credits of PCA person OJ 14 PCA person’s equivalent credit Credit A PCA person has a policyholder credit for an equivalent credit, described in a row of table O1: imputation credits, that would arise in the imputation credit account of an imputation credit account (ICA) company if that company were carrying on the person’s life insurance business.
Determining credits arising The following paragraphs apply to determine what are the equivalent credits: (a) a credit under the following sections and described in the following rows of table O1: imputation credits, is excluded: (i) section OB 9 (ICA dividend derived with imput- ation credit) row 7 (dividend derived with imput- ation credit): section OB 10 (ICA dividend derived with FDP credit) row 8 (dividend derived with FDP credit): section OB 17 (ICA transfer from policyholder credit account) row 15 (transfer from policy- holder credit account): (ii) (iii) (b) a credit under section OB 4 (ICA payment of tax) must not be more than the income tax liability that would arise if— (i) the person’s only activity related to life insurance policies offered or entered into in New Zealand; and (1) (2) 2064 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OJ 15 (3) (4) (ii) section RF 2(4) (Non-resident passive income) is disregarded.
Table references The policyholder credit in subsection (1) is referred to in table O15: person’s policyholder credits, row 2 (treatment of im- putation credit account).

The imputation credit in subsection (2)(b) is referred to in table O1: imputation credits, row 2 (pay- ment of tax).
Credit date The credit date is— (a) (b) the same as the credit date for the equivalent credit; and the day the relevant dividend is paid if the equivalent credit is for income tax treated as paid by the person under section LE 1, LF 1, or OE 19 (which relate to imputation credits, FDP credits, and foreign tax paid on branch equivalent income).
Deﬁned in this Act: business, dividend, FDP credit, ICA company, imputation credit account, income tax, income tax liability, life insurance, life insurance policy, offered or entered into in New Zealand, pay, PCA person, policyholder credit Compare: 2004 No 35 s ME 23(1)(a), (2)(a), (3), (6)(a) OJ 15 PCA person’s credit for transfer of life insurance business (1) (2) (3) When this section applies This section applies when a PCA company or a PCA person transfers a life insurance business to another PCA person.
Credit The PCA person who is the transferee has a policyholder credit for an amount equal to an amount of a policyholder debit under section OJ 18.

Table reference The policyholder credit in subsection (2) is referred to in table O15: person’s policyholder credits, row 3 (transfer of life in- surance business).

2065 Part O s OJ 16 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Credit date The credit date is the day the life insurance business is trans- ferred.
Deﬁned in this Act: amount, business, life insurance, PCA company, PCA per- son, policyholder credit, policyholder debit Compare: 2004 No 35 s ME 23(1)(b), (2)(b) Policyholder debits of PCA person OJ 16 PCA person’s payment of tax relating to policyholder base Election A PCA person may choose that some or all of the credit bal- ance in the person’s policyholder credit account is applied to satisfy— (a) a policyholder base income tax liability of the person; or a provisional tax liability of the person for the person’s policyholder base.
(b) Manner of election The person makes an election under subsection (1) by record- ing as a debit the balance applied to satisfy the policyholder base income tax liability or policyholder base provisional tax liability.

Effect of election As a result of the election,— (a) a policyholder debit arises in the person’s policyholder credit account; and the person’s liability for the income tax or provisional tax is satisﬁed.
(b) Table reference The policyholder credit in subsection (3)(a) is referred to in table O16: person’s policyholder debits, row 2 (payment of tax relating to policyholder base).

(1) (2) (3) (4) 2066 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OJ 17 (5) Debit date The debit date is the date of the election referred to in subsec- tions (1) to (3).
Deﬁned in this Act: income tax, income year, pay, PCA person, policyholder base, policyholder base income tax liability, policyholder credit account, pol- icyholder debit, provisional tax, tax year Compare: 2004 No 35 ss ME 23(4)(a), (5)(a), ME 24 OJ 17 PCA person’s equivalent debit (1) (2) (3) Debit A PCA person has a policyholder debit for an equivalent debit, described in a row of table O2: imputation debits, that would arise in the imputation credit account of an ICA company if that company were carrying on the person’s life insurance business.
Determining debits arising The following paragraphs apply to determine what are the equivalent debits: (a) a debit under the following sections and described in the following rows of table O2: imputation debits, is excluded— (i) section OB 41 (ICA debit for loss of shareholder continuity), row 14 (debit for loss of shareholder continuity): section OB 42 (ICA on-market cancellation), row 15 (on-market cancellation): section OB 47 (ICA transfer to policyholder credit account), row 20 (transfer to policyholder credit account): (ii) (iii) (b) the amount of a refund of a payment of income tax that gave rise to a credit under section OJ 14 is treated as a debit in the person’s policyholder credit account.
Table references The policyholder debit in subsection (1) is referred to in table O16: person’s policyholder debits, row 3 (treatment of im- putation credit account).

The policyholder credit in subsec- tion (2)(b) is referred to in table O15: person’s policyholder credits, row 2 (equivalent credit).
2067 Part O s OJ 18 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Debit date The debit date is— (a) (b) the same as the debit date for the equivalent debit; or the date the credit would have arisen in the imputation credit account of the PCA person if— (i) they were an ICA company in relation to the busi- ness of providing life insurance; and their policyholder credit account were an imput- ation credit account.
(ii) Deﬁned in this Act: amount, business, ICA company, imputation credit ac- count, imputation debit, income tax, life insurance, pay, PCA person, policy- holder credit account, policyholder debit Compare: 2004 No 35 s ME 23(4)(b), (5)(b) OJ 18 PCA person’s debit for transfer of life insurance business Election A PCA person may choose to transfer a credit balance in their policyholder credit account to another person on the transfer of the person’s life insurance business to— (a) (b) a PCA company; or another PCA person.
Requirements A PCA person may make an election under subsection (1) if— the transfer meets the requirements of section EY 45(1) (a) (Policyholder income formula: when life insurance business transferred); and after the transfer, the person is no longer required to maintain a policyholder credit account.
(b) Debit As a result of the election, the transferor has a debit described in table O16: person’s policyholder debits, row 4 (transfer of life insurance business) for the amount of the credit balance transferred under subsection (1).

Manner of election The person makes the election by recording as a debit the amount of the credit balance transferred in the person’s pol- icyholder credit account.
(1) (2) (3) (4) 2068 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OJ 18 (5) Debit date The debit date is the day the life insurance business is trans- ferred.
Deﬁned in this Act: amount, business, life insurance, PCA company, PCA per- son, policyholder credit account, policyholder debit Compare: 2004 No 35 s ME 23(4)(c), (5)(c) Table O13 policy holder credits Row Policyholder credit Credit date Opening credit balance 1 April Transfer of credit balance from imputation credit account Transfer of credit balance from imputation account Credit balance transferred from another policyholder account on acquisition of life insurance business Credit for maximum deﬁcit in FDP account arising during tax year Transfer of credit balance from FDP account for debit for reduced deﬁcit that arises during tax year Further deﬁned section OA 7 section OJ 3 section OJ 4 section OJ 5 debit date in imputation credit account for transfer Debit date in FDP account for transfer day of transfer of life insurance business 31 March 31 March section OJ 6 section OJ 7 2069 Part O s OJ 18 Income Tax Act 2007 Reprinted as at 1 January 2010 Table O14 policyholder debits Row Policyholder credit Debit date Open debit balance 1 April Further deﬁned section OA 7 Credit balance applied to satisfy policyholder base income tax or provisional tax liability Credit balance transferred to imputation credit account of company or group Transfer of credit to group account Credit balance transferred to another policyholder credit account on transfer of life insurance business last day of income year section OJ 8 day of election section OJ 9 section OJ 10 section OJ 11 credit date in group
 account for credit transferred day of transfer of life insurance business Table O15 person’s policyholder credits Row Policyholder credit Credit date 1 Opening credit balance 1 April Further deﬁned section OA 7 2070 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OJ 18 2 3 Equivalent credit that would arise for ICA company from life insurance business Credit balance transferred from another policyholder credit account on acquisition of life insurance business set out section OJ 14 section OJ 14
 section OJ 15 day of transfer of life insurance business Table O16 person’s policyholder debits Row Policyholder credit Debit date Open debit balance 1 April 1 2 3 4 Credit balance applied to satisfy policyholder base income tax or provisional tax liability for income year Equivalent debt that would arise for imputation credit account company from life insurance business Credit balance transferred to another policyholder credit account on transfer of life insurance business Further deﬁned section OA 7 section OJ 16 day of election debit date of equivalent debit section OJ 17 section OJ 18 day of transfer of life insurance business 2071 Part O s OK 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Subpart OK—Maori authority credit accounts (MACA) Introductory provision OK 1 General rules for Maori authorities with Maori authority credit accounts Accounts A Maori authority must maintain a Maori authority credit ac- count for a tax year.
The account is a record of Maori authority credits and Maori authority debits that arise in the account dur- ing the tax year.

Subsection (2) overrides this subsection.

Exclusion Subsection (1) does not apply for a period in which— (a) the constitution or rules of the Maori authority prohibit a distribution of any kind to a member; or the Maori authority derives only exempt income, disre- garding exempt income under section CW 10 (Dividend within New Zealand wholly-owned group).
(b) Credits Credits include an amount of income tax paid during a tax year, an imputation credit attached to a dividend derived by the Maori authority and, if the Maori authority is not also a foreign dividend payment account (FDPA) company, a foreign dividend payment (FDP) credit attached to a dividend derived.

Debits Debits may include a refund of income tax and a Maori au- thority credit attached to a taxable Maori authority distribution paid by the Maori authority.
General rules The general rules on memorandum accounts set out in sections OA 2 and OA 3 (which relate to the treatment of memorandum accounts) apply to Maori authority credit accounts.
Deﬁned in this Act: amount, dividend, exempt income, FDP credit, FDPA com- pany, imputation credit, income tax, Maori authority, Maori authority credit, Maori authority credit account, Maori authority debit, member, memorandum account, pay, tax year, taxable Maori authority distribution Compare: 2004 No 35 ss MK 1, MK 3 (1) (2) (3) (4) (5) 2072 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OK 3 Maori authority credits OK 2 MACA payment of tax (1) (2) (3) (4) Credit A Maori authority has a Maori authority credit for a payment of income tax or provisional tax.
Subsection (3) overrides this subsection.

Table reference The Maori authority credit in subsection (1) is referred to in table O17: Maori authority credits, row 2 (payment of tax).
No credit No credit under subsection (1) arises for— (a) income tax paid for a tax year before the 2004–05 tax year; or income tax paid for income derived when the Maori authority was not a Maori authority; or income tax paid by a credit under section LE 1 (Tax credits for imputation credits); or income tax paid by a tax credit under subpart LA (Tax credits and other credits) and section LH 2 (Tax credits relating to expenditure on research and development); or further income tax applied under section OK 23 to pay income tax or provisional tax.
(b) (c) (cb) (d) Credit date The credit date is the day the tax is paid.

Deﬁned in this Act: further income tax, income, income tax, Maori authority, Maori authority credit, pay, provisional tax, tax year Compare: 2004 No 35 s MK 4(1)(a), (2)(a) Section OK 2(3)(cb): substituted (with effect on 1 April 2008), on 6 October 2009, by section 440(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OK 2(3)(cb): inserted, on 1 April 2008, by section 510 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

OK 3 MACA payment of tax to other Maori authorities (1) Credit A Maori authority has a Maori authority credit for a payment of tax to another Maori authority that is treated as a payment 2073 Part O s OK 4 Income Tax Act 2007 Reprinted as at 1 January 2010 transferred from company A to company B under section RC 32 (Wholly-owned groups of companies).
Table reference The Maori authority credit in subsection (1) is referred to in table O17: Maori authority credits, row 3 (payment of tax to another Maori authority).

Credit date The credit date is the day the tax is paid.

Deﬁned in this Act: Maori authority, Maori authority credit, pay Compare: 2004 No 35 s MK 4(1)(b), (2)(a) (2) (3) OK 4 MACA payment of further income tax (1) (2) (3) Credit A Maori authority has a Maori authority credit for a payment of further income tax under section OK 21 or OK 22.
Table reference The Maori authority credit in subsection (1) is referred to in table O17: Maori authority credits, row 4 (payment of further income tax).

Credit date The credit date is the day the further income tax is paid.
Deﬁned in this Act: further income tax, Maori authority, Maori authority credit, pay Compare: 2004 No 35 s MK 4(1)(c), (2)(a) OK 4B MACA expenditure on research and development Credit A Maori authority has a Maori authority credit for an amount of a tax credit that the authority has under section LH 2 (Tax credits relating to expenditure on research and development).
Table reference The Maori authority credit in subsection (1) is referred to in table O17: Maori authority credits, row 4B (tax credit for re- search and development expenditure).

(1) (2) 2074 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OK 6 (3) Credit date The credit date is the day the authority’s return of income is ﬁled.
Deﬁned in this Act: amount, Commissioner, Maori authority credit, return of income, tax credit Compare: 2004 No 35 s MK 4(1)(gb), (2)(db) Section OK 4B: inserted, on 1 April 2008, by section 511 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

OK 5 MACA distribution with Maori authority credit (1) (2) (3) Credit A Maori authority has a Maori authority credit for the amount of a Maori authority credit attached to a distribution derived by the Maori authority.
Table reference The Maori authority credit in subsection (1) is referred to in table O17: Maori authority credits, row 5 (distribution with Maori authority credit).

Credit date The credit date is the day the distribution is made.
Deﬁned in this Act: amount, distribution, Maori authority, Maori authority credit Compare: 2004 No 35 s MK 4(1)(d), (2)(b) OK 6 MACA dividend derived with imputation credit (1) (2) (3) Credit A Maori authority has a Maori authority credit for the amount of an imputation credit attached to a dividend derived by the Maori authority.

Table reference The Maori authority credit in subsection (1) is referred to in table O17: Maori authority credits, row 6 (dividend derived with imputation credit).
Credit date The credit date is the day the dividend is paid.

Deﬁned in this Act: amount, dividend, imputation credit, Maori authority, Maori authority credit, pay Compare: 2004 No 35 s MK 4(1)(e), (2)(c) 2075 Part O s OK 7 Income Tax Act 2007 Reprinted as at 1 January 2010 OK 7 MACA dividend derived with FDP credit (1) (2) (3) Credit A Maori authority has a Maori authority credit for the amount of an FDP credit attached to a dividend derived by the Maori authority when it is not an FDPA company.
Table reference The Maori authority credit in subsection (1) is referred to in table O17: Maori authority credits, row 7 (dividend derived with FDP credit).

Credit date The credit date is the day the dividend is paid.
Deﬁned in this Act: amount, dividend, FDP credit, FDPA company, Maori au- thority, Maori authority credit, pay Compare: 2004 No 35 s MK 4(1)(f), (2)(c) OK 8 MACA resident withholding tax withheld (1) (2) (3) Credit A Maori authority has a Maori authority credit for the amount of tax for resident passive income treated under section RA 9(1)(b) (Treatment of amounts withheld as received) as de- rived by the Maori authority.
Table reference The Maori authority credit in subsection (1) is referred to in table O17: Maori authority credits, row 8 (RWT).

Credit date The credit date is the day the amount of tax is withheld.
Deﬁned in this Act: amount of tax, Maori authority, Maori authority credit, resident passive income, RWT Compare: 2004 No 35 s MK 4(1)(h), (2)(e) OK 9 MACA reversal of tax advantage arrangement When this section applies This section applies when it is established that a Maori author- ity credit in a Maori authority’s credit account was incorrectly determined to be the subject of an arrangement to obtain a tax advantage.
(1) 2076 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OK 11 (2) (3) (4) Credit The Maori authority has a Maori authority credit for an amount that equals the amount of a debit in the Maori authority credit account under section OK 17.

Table references The Maori authority credit in subsection (2) is referred to in table O17: Maori authority credits, row 9 (reversal of tax ad- vantage arrangement).
The Maori authority debit in subsec- tion (2) is referred to in table O18: Maori authority debits, row 9 (tax advantage arrangement).

Credit date The credit date is the same as the debit date for the debit under section OK 17.
Deﬁned in this Act: amount, Maori authority, Maori authority credit, Maori authority credit account, Maori authority debit, tax advantage Compare: 2004 No 35 s MK 4(1)(g), (2)(d) Maori authority debits OK 10 MACA distribution (1) (2) (3) Debit A Maori authority has a Maori authority debit for the amount of a Maori authority credit attached to a distribution made by the Maori authority.
Table reference The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 2 (distribution).

Debit date The debit date is the day the distribution is made.
Deﬁned in this Act: amount, distribution, Maori authority, Maori authority credit, Maori authority debit Compare: 2004 No 35 s MK 5(1)(a), (2)(a) OK 11 MACA allocation of provisional tax (1) Debit A Maori authority has a Maori authority debit for an amount of provisional tax treated under section RC 32 (Wholly-owned 2077 Part O s OK 12 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) groups of companies) as allocated by the Maori authority to another Maori authority as an underpaid company.
Table reference The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 3 (allocation of provi- sional tax).

Debit date The debit date is the day the Commissioner is notiﬁed of the allocation.
Deﬁned in this Act: amount, Commissioner, company, Maori authority, Maori authority debit, notify, provisional tax Compare: 2004 No 35 s MK 5(1)(b), (2)(b) OK 12 MACA refund of income tax Debit A Maori authority has a Maori authority debit for the amount of a refund of income tax paid to the Maori authority.

Subsec- tions (2) and (4) override this subsection.
No debit The amount of a debit under subsection (1) does not include— a refund of income tax paid for a tax year before the (a) 2004–05 tax year; or a refund of income tax paid to the Maori authority that is no more than the debit under section OK 15; or a refund of income tax paid for a period when the Maori authority credit account was not maintained.

(b) (c) Table references The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 4 (refund of income tax).
The Maori authority debit in subsection (2)(b) is referred to in table O18: Maori authority debits, row 7 (debit for loss of shareholder continuity).
Part-year Maori authorities If a Maori authority maintains a Maori authority credit account for only part of a tax year, the amount of the debit is calculated using the formula— (1) (2) (3) (4) 2078 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OK 13 (5) (6) (7) Deﬁnition of items in formula In the formula,— (a) account days is the number of days in the tax year for which the Maori authority maintains the Maori author- ity credit account: refund is the amount of the refund.
(b) Debit date The debit date is the day the refund is made.

Relationship with section OK 14B This section does not apply to an amount that gives rise to a debit under section OK 14B.
Deﬁned in this Act: amount, income tax, Maori authority, Maori authority credit account, Maori authority debit, pay, tax year Compare: 2004 No 35 s MK 5(1)(c), (g), (2)(c) Section OK 12(7) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 441(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OK 12(7): added (with effect on 1 April 2008), on 6 October 2009, by section 441(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OK 13 MACA payment of other taxes (1) (2) Debit A Maori authority has a Maori authority debit for an amount of overpaid income tax applied to pay an amount due under the Inland Revenue Acts.

Subsection (2) overrides this sub- section.
No debit The amount of a debit under subsection (1) does not include an amount of overpaid income tax— (a) applied to satisfy a liability for income tax or provi- sional tax; or paid for a tax year before the 2004–05 tax year; or that relates to income tax paid before a Maori authority debit arises under section OK 15 when the amount is no (b) (c) 2079 Part O s OK 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) more than the amount of the debit for loss of shareholder continuity.
Table references The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 5 (payment of other taxes).

The Maori authority debit in subsection (2)(c) is re- ferred to in table O18: Maori authority debits, row 7 (debit for loss of shareholder continuity).

Debit date The debit date is the day the amount is applied.

Relationship with section OK 14B This section does not apply to an amount that gives rise to a debit under section OK 14B.
Deﬁned in this Act: amount, income tax, income tax liability, income year, Inland Revenue Acts, Maori authority, Maori authority debit, pay, provisional tax, shareholder, tax year Compare: 2004 No 35 s MK 5(1)(j), (2)(i) Section OK 13(5) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 442(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OK 13(5): added (with effect on 1 April 2008), on 6 October 2009, by section 442(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OK 14 MACA refund of FDP Debit A Maori authority has a Maori authority debit for the amount of a refund of FDP paid to the Maori authority when it is not an FDPA company.

Table reference The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 6 (refund of FDP).
Debit date The debit date is the day the refund is made.
Deﬁned in this Act: amount, FDP, FDPA company, Maori authority, Maori authority debit, pay Compare: 2004 No 35 s MK 5(1)(e), (2)(c) (1) (2) (3) 2080 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OK 14B OK 14B MACA refund of tax credit (1) (2) (3) (4) Debit A Maori authority has a Maori authority debit for— (a) the amount of a transfer under section LA 6(2)(d) (Re- maining refundable credits: PAYE, RWT, and certain other items) to the extent to which the transfer does not lead to a refund of income tax: the amount of a refund to the authority under section LA 6(2)(e): an amount used under section LH 2(6) (Tax credits re- lating to expenditure on research and development) to pay an amount payable under an Inland Revenue Act to the extent to which the use does not lead to a refund of income tax.
(b) (c) Exclusion Despite subsection (1), a Maori authority that is an FDPA com- pany does not have a Maori authority debit to the extent to which the amount transferred, refunded, or used is a tax credit under subpart LF (Tax credits for FDP credits).

Table reference The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 6B (refund of tax credit).
Debit date The debit date is— (a) for a debit referred to in subsection (1)(a), the day the amount is transferred: for a debit referred to in subsection (1)(b), the day the amount is refunded: for a debit referred to in subsection (1)(c), the day the amount is applied.
(b) (c) Deﬁned in this Act: amount, FDPA company, Inland Revenue Acts, Maori au- thority, Maori authority debit, pay Section OK 14B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 443(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2081 Part O s OK 15 Income Tax Act 2007 Reprinted as at 1 January 2010 OK 15 MACA debit for loss of shareholder continuity (1) (2) (3) Debit A Maori authority has a Maori authority debit for the amount of a Maori authority credit retained in the Maori authority credit account and unused at the time at which shareholder continuity is lost.

Table reference The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 7 (debit for loss of shareholder continuity).
When debit arises The debit arises at the time shareholder continuity is lost.

Deﬁned in this Act: amount, company, Maori authority, Maori authority credit, Maori authority credit account, Maori authority debit, shareholder Compare: 2004 No 35 s MK 5(1)(f), (2)(f) Section OK 15(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 93(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section OK 15(3) heading: amended (with effect on 1 April 2008), on 7 De- cember 2009, by section 93(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section OK 15(3): amended (with effect on 1 April 2008), on 7 December 2009, by section 93(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
OK 16 MACA breach of Maori authority credit ratio Debit A Maori authority has a Maori authority debit for a breach in a tax year of the Maori authority credit ratio under section OK 20(3) for an amount calculated using the formula— (net distributions × Maori authority credit ratio) – credits attached.
Deﬁnition of items in formula In the formula,— (a) net distributions is the total amount of all taxable Maori authority distributions made by the Maori author- ity during the tax year, excluding the amount of Maori authority credits attached to the distributions: (1) (2) 2082 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OK 17 (b) Maori authority credit ratio is the maximum permit- ted ratio calculated under section OA 18(2) (Calculation of maximum permitted ratios) or, if less, the greatest Maori authority credit ratio of all taxable Maori author- ity distributions made by the Maori authority during the tax year: (c) credits attached is the total amount of all Maori authority credits attached to distributions paid by the Maori authority during the tax year.
Ratio change declaration A debit under subsection (1) does not arise if the Maori au- thority provides a ratio change declaration under section OK 20(5).

Table reference The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 8 (breach of Maori authority credit ratio).

Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, distribution, Maori authority, Maori authority credit, Maori authority credit account, Maori authority credit ratio, Maori au- thority debit, tax year, taxable Maori authority distribution Compare: 2004 No 35 ss MK 5(1)(d), (2)(d), MK 7(5) (3) (4) (5) OK 17 MACA tax advantage arrangement (1) (2) Debit A Maori authority has a Maori authority debit for the amount of a further debit for a tax advantage arrangement referred to in section GB 43(2) and (3) (Reconstruction of Maori authority credit arrangements to obtain tax advantage).
Table reference The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 9 (tax advantage ar- rangement).

2083 Part O s OK 18 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Debit date The debit date is the last day of the tax year in which the tax advantage arrangement began.
Deﬁned in this Act: amount, arrangement, Maori authority, Maori authority credit account, Maori authority debit, tax advantage, tax year Compare: 2004 No 35 s MK 5(1)(h), (2)(g) OK 18 MACA ﬁnal balance (1) (2) (3) Debit A Maori authority has a Maori authority debit for a credit bal- ance in the Maori authority credit account when the Maori au- thority stops being a Maori authority.
Table reference The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 10 (ﬁnal balance).

Debit date The debit date is day the Maori authority stops being a Maori authority.
Deﬁned in this Act: Maori authority, Maori authority credit account, Maori authority debit Compare: 2004 No 35 s MK 5(1)(i), (2)(h) Maori authority credits attached to distributions OK 19 Maori authority credits attached to distributions Attaching Maori authority credits (1) When a Maori authority makes a taxable Maori authority dis- tribution, it may attach a Maori authority credit to the distri- bution.
(2) Maori authority credit ratio A distribution referred to in subsection (1) must have a Maori authority credit ratio calculated using the formula— Deﬁnition of items in formula In the formula,— (a) credit attached is the amount of Maori authority credit attached to the distribution: (3) 2084 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OK 20 (4) (5) (6) (7) (b) net distribution is the amount of distribution made, excluding the amount of Maori authority credit.
Maximum permitted ratio A Maori authority credit attached to a distribution must not be more than the maximum permitted ratio calculated under section OA 18(2) (Calculation of maximum permitted ratios).

Co-operative companies A Maori authority that is also a co-operative company may at- tach a Maori authority credit to a notional distribution.
The provisions of section OB 79 (Co-operative companies attach- ing imputation credits to notional distributions) apply to the notional distribution as if references in that section to— (a) an imputation credit were a reference to a Maori author- ity credit; and an imputation credit account were a reference to a Maori authority credit account.

(b) Retrospective attachment A Maori authority may retrospectively attach a Maori author- ity credit to a taxable Maori authority distribution.
Application of other provisions The provisions of section OB 62 (Retrospective attachment of imputation credits) apply to a distribution under this section as if a reference in that section to— (a) an imputation credit were a reference to a Maori author- ity credit; and an imputation credit account were a reference to a Maori authority credit account.
(b) Deﬁned in this Act: amount, co-operative company, imputation credit, imput- ation credit account, Maori authority, Maori authority credit, Maori authority credit account, Maori authority credit ratio, maximum permitted ratio, taxable Maori authority distribution Compare: 2004 No 35 ss MK 6, MK 7(1) OK 20 MACA benchmark distribution rules (1) When this section applies This section applies when a Maori authority pays a taxable Maori authority distribution on more than 1 occasion during a tax year.
2085 Part O s OK 21 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) (5) Benchmark distribution The ﬁrst distribution of the tax year is the benchmark distribu- tion.

Same Maori authority credit ratio The Maori authority credit ratio of a distribution made after the benchmark distribution must be the same as the Maori au- thority credit ratio of the benchmark distribution.
Debit for breach of Maori authority credit ratio A breach of subsection (3) gives rise to a Maori authority debit under section OK 16 (table O18: Maori authority debits, row 8 (breach of Maori authority credit ratio)) for an amount cal- culated using the formula in section OK 16(1).
Ratio change declaration A Maori authority may notify the Commissioner that the distri- bution is not part of an arrangement to obtain a tax advantage by providing a ratio change declaration stating that the distri- bution is not part of an arrangement to which sections GB 35 and GB 36 (which relate to imputation arrangements to obtain a tax advantage) apply.

The Maori authority must provide the declaration before the distribution is made, or by a later date if the Commissioner allows.
For the purposes of this subsection, the distribution must not be part of an arrangement to obtain a tax advantage.

This subsection overrides subsection (4).
Deﬁned in this Act: amount, arrangement, benchmark distribution, Commis- sioner, Maori authority, Maori authority credit ratio, Maori authority debit, no- tify, pay, tax advantage, tax year, taxable Maori authority distribution Compare: 2004 No 35 s MK 7(2)–(4) Further income tax OK 21 Further income tax for closing debit balance Liability A Maori authority is liable to pay further income tax for the amount of a debit balance in its Maori authority credit account at the end of a tax year.
Due date The Maori authority must pay the further income tax to the Commissioner no later than 20 June following the end of the tax year.
(1) (2) 2086 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OK 22 Application of other provisions (3) When it is appropriate for the purposes of this section, the other sections of this Act and the Tax Administration Act 1994— (a) apply to further income tax as if they addressed further income tax and not income tax; and apply, modiﬁed as necessary, to ensure their application to the further income tax rather than income tax; and do not override the imputation rules and section 101 of the Tax Administration Act 1994.
(b) (c) Deﬁned in this Act: amount, Commissioner, further income tax, imputation rules, income tax, Maori authority, Maori authority credit account, pay, tax year Compare: 2004 No 35 s MK 8(1), (2), (6) OK 22 Further income tax paid when Maori authority no longer Maori authority (1) (2) (3) Liability A Maori authority is liable to pay further income tax for a debit balance in its Maori authority credit account immediately before the Maori authority stops being a Maori authority.
Due date The Maori authority must pay the further income tax to the Commissioner by the day on which the Maori authority stops being a Maori authority.

Paramount section A Maori authority that stops being a Maori authority on the last day of a tax year is liable for further income tax under this section and not under section OK 21.
Application of other provisions (4) When it is appropriate for the purposes of this section, the other sections of this Act and the Tax Administration Act 1994— (a) apply to further income tax as if they addressed further income tax and not income tax; and apply, modiﬁed as necessary, to ensure their application to the further income tax rather than income tax; and do not override the imputation rules and section 101 of the Tax Administration Act 1994.
(b) (c) Deﬁned in this Act: Commissioner, further income tax, imputation rules, in- come tax, Maori authority, Maori authority credit account, pay, tax year Compare: 2004 No 35 s MK 8(3), (4), (6) 2087 Part O s OK 23 Income Tax Act 2007 Reprinted as at 1 January 2010 OK 23 Further income tax paid satisfying liability for income tax (1) (2) (3) Election A Maori authority that is liable for income tax or provisional tax may choose to satisfy the liability through a payment of further income tax.
Requirements The liability referred to in subsection (1) must be for an income year corresponding to a tax year in which the Maori authority maintains a Maori authority credit account.

When treated as paid The income tax or provisional tax is treated as paid on the day the further income tax is paid to the Commissioner.
Deﬁned in this Act: Commissioner, further income tax, income tax, income year, Maori authority, Maori authority credit account, pay, provisional tax, tax year Compare: 2004 No 35 s MK 8(5) OK 24 Income tax paid satisfying liability for further income tax Election A Maori authority that is liable for further income tax may choose to satisfy the liability through a payment of income tax.
Requirements The liability referred to in subsection (1) must be for an income year corresponding to a tax year in which the Maori authority maintains a Maori authority credit account.

When treated as paid The further income tax is treated as paid on the day the income tax is paid to the Commissioner.
Deﬁned in this Act: Commissioner, further income tax, income tax, income year, Maori authority, Maori authority credit account, pay, tax year Compare: 2004 No 35 s MK 8(5B) (1) (2) (3) 2088 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OK 24 Table O17 Maori authority credits Row Maori authority credit Credit date 1 2 3 4 Opening credit balance 1 April Provisional tax and income tax paid Tax paid to another Maori authority day of payment day of payment Further income tax paid day of 4B Tax credit for research and development expenditure payment day return ﬁled Further deﬁned section OA 7 section OK 2 section OK 3 section OK 4 section OK 4B.
5 Maori authority credit attached to distribution derived day on which distribution is paid section OK Imputation credit attached to dividend derived day on which dividend is paid section OK 6 FDP credit attached to dividend derived when not FDP company day on which dividend is paid section OK 7 RWT withheld day on which amount withheld section OK 8 Reversal of debit for tax advantage arrangement debit date for debit section OK 9 Table O17 row 4B: inserted, on 1 April 2008, by section 512 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
2089 Part O s OK 24 Income Tax Act 2007 Reprinted as at 1 January 2010 Table O18 Maori authority debits Row Maori authority Opening debit balance Maori authority credit attached to distribution paid allocation of provisional tax Credit date Further deﬁned 1 April section OA 7 section OK 10 section OK 11 day of distribu- tion day of notice of alloca- tion Refund of income tax day of refund section OK 12 Overpaid income tax applied to satisfy another taxation liability Refund of FDP when not FDPA company Transfer, refund, or use of tax credit Debit for loss of shareholder continuity for Maori authority that is company day of ap- plication section OK 13 day of refund section OK 14 section OK 14B section OK 15 day of transfer, refund, or use time of loss of continu- ity 6B 7 2090 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 1 8 9 10 Debit for breach of Maori authority credit ratio Debit for tax advantage arrangement 31 March section OK 16 section OK 17 last day of tax year in which ar- range- ment be- gan Credit balance when Maori authority credit account stops day of cessation section OK 18 Table O18 row 6B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 444(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O18 row 7: amended (with effect on 1 April 2008), on 7 December 2009, by section 94 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Subpart OP—Memorandum accounts of consolidated groups Introductory provisions OP 1 Memorandum accounts of consolidated groups (1) (2) Single company For the purposes of this Part, a consolidated group is treated as if it were a single company, and subpart FM (Consolidated groups of companies) applies to the consolidated group.
Consolidated group accounts A consolidated group may be— (a) required to maintain a memorandum account for a tax year; or entitled to maintain a memorandum account for a tax year.

(b) 2091 Part O s OP 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (5) Separate accounts A consolidated group’s memorandum account is separate from the memorandum account of each company in the consoli- dated group.
General rules The general rules on memorandum accounts set out in sections OA 2 and OA 3 (which relate to the treatment of memorandum accounts) apply to a memorandum account of a consolidated group.

Tables The credits and debits that arise in a memorandum account are listed in tables set out at the end of this subpart.
The tables— (a) (b) state the credits and the debits; and state the credit dates and debit dates when the credits and debits arise; and refer to the section that fully deﬁnes them, and provides the credit dates and debit dates for each credit and debit.
Deﬁned in this Act: company, consolidated group, memorandum account, tax year Compare: 2004 No 35 ss ME 10, ME 25, MF 7(2), MG 13, MI 14 (c) OP 2 When credits and debits arise only in group accounts Credits only in group account A credit may arise only in the memorandum account of a consolidated group and not in the memorandum account of a group company, unless another provision expressly states otherwise.
Debits only in group account A debit may arise only in the memorandum account of a consolidated group and not in the memorandum account of a group company, unless another provision expressly states otherwise.

Particular credits and debits The credit referred to in subsection (1) and the debit referred to in subsection (2) are listed in provisions in this subpart.
Company’s obligation overridden This section applies despite— (1) (2) (3) (4) 2092 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 3 (a) (b) the obligation that a group company may have under this Part to record a credit or debit; and the fact that the credit and debit referred to in this sec- tion may otherwise be eligible to give rise to a credit or debit in the group company’s account.
Deﬁned in this Act: company, consolidated group, memorandum account Compare: 2004 No 35 ss ME 13, ME 27, MF 9, MG 16, MI 19 Consolidated groups and imputation credit accounts Introductory provisions OP 3 Changes in consolidated imputation groups (1) (2) (3) (4) New group company A consolidated group that is a consolidated imputation group continues to have the same imputation credit account if the group starts an imputation group with a company that is not part of another consolidated group.
Combining consolidated imputation groups The companies that are part of 2 or more consolidated im- putation groups that choose to combine to form 1 imputation group must record in the imputation credit account of the new group— (a) all credits and debits in the imputation credit accounts of the 2 groups immediately before the election takes effect; and all credits and debits that arise for a group company that is part of the new group on and after the election takes effect.
(b) Imputation group becoming consolidated group An imputation group continues to use its imputation credit ac- count if the companies that are part of the imputation group choose to convert their status to that of a consolidated group that is a consolidated imputation group.
Opening balances The opening balances for the imputation credit account of the consolidated imputation group referred to in subsection (3) are 2093 Part O s OP 4 Income Tax Act 2007 Reprinted as at 1 January 2010 set out in section OA 7 (Opening balances of memorandum accounts).
Deﬁned in this Act: company, consolidated group, consolidated imputation group, imputation credit account, imputation group Compare: 2004 No 35 s ME 10(1A), (1B), (1D) OP 4 Resident imputation subgroups (1) (2) Subgroup of trans-Tasman imputation group The resident imputation subgroup of a trans-Tasman imput- ation group must record in its imputation credit account the credits and debits described in subsection (2).
Eligible credits and debits The credits and debits referred to in subsection (1) are those that arise in the imputation credit account of the subgroup’s trans-Tasman imputation group in relation to a company that— will be part of the subgroup if the credit or debit arises (a) before the subgroup is formed; or is part of the subgroup if the credit or debit arises when or after the subgroup is formed.
(b) Deﬁned in this Act: company, imputation credit account, imputation group, resident imputation subgroup, trans-Tasman imputation group Compare: 2004 No 35 s ME 10(1C) OP 5 When credits and debits arise only in consolidated imputation group accounts Credits only in group account A credit listed in subsection (2) arises only in the imputation credit account of a consolidated imputation group and not in the imputation credit account of a group company.
Particular credits The credit referred to in subsection (1) is a credit under the following sections and described in the following rows of table O19: imputation credits of consolidated imputation groups: (a) (b) (bb) section OP 7, row 2 (payment of tax): section OP 8, row 3 (deposit in tax pooling account): section OP 11B, row 6B (tax credit for research and development expenditure): (1) (2) 2094 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 5 (3) (4) (c) (d) (e) section OP 12, row 7 (dividend derived with imputation credit): section OP 13, row 8 (dividend derived with FDP credit).
[Repealed] Debits only in the group account A debit listed in subsection (4) arises only in the imputation credit account of a consolidated imputation group and not in the imputation credit account of a group company.
Particular debits The debit referred to in subsection (3) is a debit under the fol- lowing sections and described in the following rows of table O20: imputation debits of consolidated imputation groups: section OP 28, row 2 (payment of dividend): (a) section OP 30, row 4 (refund of income tax): (b) section OP 32, row 6 (refund from tax pooling account): (c) section OP 33, row 7 (transfer to tax pooling account): (d) section OP 34, row 8 (refund of FDP): (e) section OP 35, row 9 (refund of tax credit): (f) section OP 37, row 11 (group company’s debit): (g) section OP 39, row 13 (replacement payment under (h) share-lending arrangement): section OP 40, row 14 (returning share transfer): section OP 41, row 15 (credit transfer): section OP 43, row 17 (breach of imputation ratio).
(i) (j) (k) Deﬁned in this Act: company, consolidated imputation group, imputation credit, imputation credit account, imputation debit Compare: 2004 No 35 s ME 12(1) Section OP 5(2)(bb): inserted, on 1 April 2008, by section 513 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OP 5(2)(d): amended (with effect on 1 April 2009), on 6 October 2009, by section 445(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 5(2)(e): repealed (with effect on 1 April 2009), on 6 October 2009, by section 445(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2095 Part O s OP 6 Income Tax Act 2007 Reprinted as at 1 January 2010 OP 6 Provisions applying to consolidated imputation groups Single company, tax liabilities The provisions listed in subsection (2) apply, modiﬁed as ne- cessary, to a consolidated imputation group and to the imput- ation credit account of the group as if— (a) (b) the group were a single company; and a reference to a company’s liability for further income tax, late payment penalty, or imputation penalty tax were a reference to a joint and several liability owed by group companies when the tax or penalty becomes payable.
Other provisions The provisions are— (a) (ab) section OB 61 (ICA benchmark dividend rules); and sections OB 65 and OB 66 (which relate to further in- come tax); and sections OB 71 and OB 72 (which relate to imputation additional tax); and sections 97, 101, 139B, 140B, 140D, and 180 of the Tax Administration Act 1994.

(ac) (b) Consolidation provisions Sections FM 4 and FM 5 (which relate to the liabilities of group companies) override subsection (1)(b).
Tax advantage arrangements and determinations Sections GB 35 and GB 36 (which relate to tax advantage arrangements), LE 1(5) (Tax credits for imputation credits), OA 2(5) (Memorandum accounts), and sections 90AF and 104B of the Tax Administration Act 1994 apply, modiﬁed as necessary, in a case that involves accounts of a consolidated imputation group as if— (a) (b) the group were a single company; and references to the provisions of this Act or the Tax Administration Act 1994 were references to the equiva- lent provisions applicable to the equivalent accounts.
Refunds for overpaid amounts Sections RM 13 to RM 17, RM 32, and RZ 6 (which relate to limits on refunds) apply, modiﬁed as necessary, in relation to income tax paid by a consolidated imputation group as if— (1) (2) (3) (4) (5) 2096 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 6 (6) (7) (a) (b) (c) the group were a single company; and a reference to that company when it stops being an ICA company were a reference to the consolidated group when it stops being a consolidated imputation group; and references to the provisions of this Act or the Tax Administration Act 1994 were references to the equiva- lent provisions applicable to the equivalent accounts.
Limits on refunds Despite subsection (5), sections RM 13 to RM 17, RM 32, and RZ 6 do not apply to limit a refund payable to a company that is part of a consolidated imputation group in relation to income tax paid individually by the company to the extent to which those sections would not have limited the refund if it had been a refund payable to the group in relation to income tax paid by the group.
However, if an amount is refunded and would not have been payable but for this subsection, section RM 15(1) (Changes in credit balances) applies as if the refund were made in relation to income tax paid by the group.

Applying for refunds If a company that is part of an imputation group is entitled to a refund under sections RM 2 or RM 4 to RM 6 (which relate to refunds for overpaid income tax), the company must apply for a refund by notifying the Commissioner.
Sections RM 13 to RM 17, RM 32, and RZ 6 apply to the entitlement as if— (a) the imputation credit account of the group were the im- putation credit account of the company: a credit in the imputation credit account for the purposes of those sections were reduced by the amount of a re- fund to a company that is part of the group.
(b) Deﬁned in this Act: Commissioner, company, consolidated group, consolidated imputation group, further income tax, ICA company, imputation additional tax, imputation credit account, imputation group, imputation penalty tax, income tax, notify, pay, tax Compare: 2004 No 35 s ME 14(3) Section OP 6(2)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 446(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 6(2)(ab): inserted (with effect on 1 April 2008), on 6 October 2009, by section 446(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

2097 Part O s OP 6 Income Tax Act 2007 Reprinted as at 1 January 2010 Section OP 6(2)(ac): inserted (with effect on 1 April 2008), on 6 October 2009, by section 446(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 6(4) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 446(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 6(4): added (with effect on 1 April 2008), on 6 October 2009, by section 446(2) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section OP 6(5) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 446(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 6(5): added (with effect on 1 April 2008), on 6 October 2009, by section 446(2) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section OP 6(6) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 446(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 6(6): added (with effect on 1 April 2008), on 6 October 2009, by section 446(2) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section OP 6(7) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 446(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 6(7): added (with effect on 1 April 2008), on 6 October 2009, by section 446(2) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Section OP 6 list of deﬁned terms Commissioner: inserted (with effect on 1 April 2008), on 6 October 2009, by section 446(3) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 6 list of deﬁned terms consolidated group: inserted (with effect on 1 April 2008), on 6 October 2009, by section 446(3) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 6 list of deﬁned terms ICA company: inserted (with effect on 1 April 2008), on 6 October 2009, by section 446(3) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 6 list of deﬁned terms imputation additional tax: inserted (with effect on 1 April 2008), on 6 October 2009, by section 446(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 6 list of deﬁned terms imputation group: inserted (with effect on 1 April 2008), on 6 October 2009, by section 446(3) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2098 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 7 Section OP 6 list of deﬁned terms income tax: inserted (with effect on 1 April 2008), on 6 October 2009, by section 446(3) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 6 list of deﬁned terms notify: inserted (with effect on 1 April 2008), on 6 October 2009, by section 446(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 6 list of deﬁned terms tax: added (with effect on 1 April 2008), on 6 October 2009, by section 446(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Imputation credits of consolidated imputation groups OP 7 Consolidated ICA payment of tax (1) (2) (3) Credit A consolidated imputation group has an imputation credit for a payment of income tax.

Subsection (3) overrides this sub- section.

Table reference The imputation credit in subsection (1) is referred to in table imputation credits of consolidated imputation groups, O19: row 2 (payment of tax).
No credit A consolidated imputation group does not have an imputation credit for an amount of— (a) income tax paid as a trustee, unless paid on category A income; or a transfer from a tax pooling account to a tax account with the Commissioner; or income tax paid on income derived by a company that is not an imputation credit account (ICA) company; or income tax paid by a life insurer subject to section EY 48 (Non-resident life insurers with life insurance poli- cies in New Zealand) to satisfy the tax year’s policy- holder base income tax liability; or income tax paid under section LE 1 (Tax credits for imputation credits) by crediting an imputation credit; or income tax paid under section LF 1 (Tax credits for FDP credits) by crediting a foreign dividend payment (FDP) credit; or (b) (c) (d) (e) (f) 2099 Part O s OP 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (fb) (g) (h) (i) income tax paid by a tax credit under subpart LA (Tax credits and other credits) and section LH 2 (Tax credits relating to expenditure on research and development); or income tax paid by crediting an amount under subpart LP (Tax credits for supplementary dividends); or further income tax applied under section OB 65 or OB 66 (which relate to further income tax) to pay income tax or provisional tax; or income tax paid by crediting further income tax under section OB 69(3) (Further income tax paid satisfying liability for income tax).
Credit date The credit date is the day the tax is paid.
Deﬁned in this Act: amount, category A income, Commissioner, company, consolidated imputation group, FDP credit, further income tax, ICA company, imputation credit, imputation credit account, income, income tax, life insurer, pay, policyholder base income tax liability, provisional tax, tax account with the Commissioner, tax pooling account, tax year, trustee Compare: 2004 No 35 s ME 11(1)(a), (2)(a) Section OP 7(3)(fb): substituted (with effect on 1 April 2008), on 6 October 2009, by section 447(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 7(3)(fb): inserted, on 1 April 2008, by section 514 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

(4) OP 8 Consolidated ICA deposit in tax pooling account Credit A consolidated imputation group has an imputation credit for an amount provided by it and paid by an intermediary into a tax pooling account.
Table reference The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 3 (deposit in tax pooling account).

Credit date The credit date is the day the amount is deposited.
Deﬁned in this Act: amount, consolidated imputation group, imputation credit, intermediary, pay, tax pooling account Compare: 2004 No 35 s ME 11(1)(aa), (2)(aa) (1) (2) (3) 2100 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 10 OP 9 Consolidated ICA transfer from tax pooling account (1) (2) (3) Credit A consolidated imputation group has an imputation credit for an amount that represents an entitlement to funds held in a tax pooling account and transferred by an intermediary.
Table reference The imputation credit in subsection (1) is referred to in table imputation credits of consolidated imputation groups, O19: row 4 (transfer from tax pooling account).

Credit date The credit date is— (a) the effective date under section RP 19 (Transfers from tax pooling accounts) if the amount is transferred to the group’s tax account with the Commissioner; or the day the refund is made.
(b) Deﬁned in this Act: amount, Commissioner, consolidated imputation group, imputation credit, intermediary, tax account with the Commissioner, tax pool- ing account Compare: 2004 No 35 s ME 11(1)(ab), (2)(ab) OP 10 Consolidated ICA allocation from company with overpaid provisional tax (1) (2) (3) Credit A consolidated imputation group has an imputation credit for an amount allocated under section RC 32 (Wholly-owned groups of companies) by a company that has overpaid its provisional tax.
Table reference The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 5 (allocation from excess company).

Credit date The credit date is the day the Commissioner is notiﬁed of the allocation.
Deﬁned in this Act: amount, Commissioner, company, consolidated imputation group, imputation credit, notify Compare: 2004 No 35 s ME 11(1)(b), (2)(b) 2101 Part O s OP 11 Income Tax Act 2007 Reprinted as at 1 January 2010 OP 11 Consolidated ICA payment of further income tax (1) (2) (3) Credit A consolidated imputation group has an imputation credit for an amount of further income tax paid under section OB 65 or OB 66 (which relate to further income tax).
Table reference The imputation credit in subsection (1) is referred to in table imputation credits of consolidated imputation groups, O19: row 6 (payment of further income tax).

Credit date The credit date is the day the further income tax is paid.
Deﬁned in this Act: amount, consolidated imputation group, further income tax, imputation credit, pay Compare: 2004 No 35 s ME 11(1)(c), (2)(a) OP 11B Consolidated ICA expenditure on research and development Credit A consolidated imputation group has an imputation credit for an amount of a tax credit that a group company has under sec- tion LH 2 (Tax credits relating to expenditure on research and development).
Table reference The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated groups, row 6B (tax credit for research and development expenditure).

Credit date The credit date is the day the return of income relating to the amount, is ﬁled.
Deﬁned in this Act: amount, Commissioner, company, consolidated imputation group, imputation credit, return of income, tax credit Compare: 2004 No 35 s ME 11(1)(ib), (2)(db) Section OP 11B: inserted, on 1 April 2008, by section 515 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
(1) (2) (3) 2102 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 13 OP 12 Consolidated ICA dividend derived with imputation credit (1) (2) (3) Credit A consolidated imputation group has an imputation credit for the amount of an imputation credit attached to a dividend de- rived by a group company.

Table reference The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 7 (dividend derived with imputation credit).
Credit date The credit date is the day the dividend is paid.
Deﬁned in this Act: amount, company, consolidated imputation group, divi- dend, imputation credit, pay Compare: 2004 No 35 s ME 11(1)(d), (2)(c) OP 13 Consolidated ICA dividend derived with FDP credit (1) (2) (3) Credit A consolidated imputation group has an imputation credit for the amount of an FDP credit attached to a dividend derived by a group company that— (a) is part of a consolidated group without an FDP account; or does not have an FDP account and is not part of a con- solidated group.
(b) Table reference The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 8 (dividend derived with FDP credit).

Credit date The credit date is the day the dividend is paid.
Deﬁned in this Act: amount, company, consolidated group, consolidated im- putation group, dividend, FDP account, FDP credit, imputation credit, pay Compare: 2004 No 35 s ME 11(1)(e), (2)(c) 2103 Part O s OP 14 Income Tax Act 2007 Reprinted as at 1 January 2010 OP 14 Consolidated ICA payment of FDP [Repealed] Section OP 14: repealed (with effect on 30 June 2009), on 6 October 2009, by section 448(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 15 Consolidated ICA replacement payment to company under share-lending arrangement (1) (2) (3) Credit A consolidated imputation group has an imputation credit for the amount of an imputation credit attached under section OB 64 (Replacement payments) or treated as attached under sec- tion RE 25 (When amount of tax treated as imputation credit) to a replacement payment paid under a share-lending arrange- ment to a company that is part of the consolidated imputation group at the date of payment.
Table reference The imputation credit in subsection (1) is referred to in table imputation credits of consolidated imputation groups, O19: row 10 (replacement payment under share-lending arrange- ment).

Credit date The credit date is the day the replacement payment is paid.
Deﬁned in this Act: amount, company, consolidated imputation group, imput- ation credit, pay, replacement payment, share-lending arrangement Compare: 2004 No 35 s ME 11(1)(eb), (ec), (2)(cb) OP 16 Consolidated ICA credit transfer to company Credit A consolidated imputation group has an imputation credit for the amount of an imputation credit shown in a credit transfer notice given to a company that is part of the consolidated im- putation group when the notice is given.
Table reference The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 11 (credit transfer).

(1) (2) 2104 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 18 (3) Credit date The credit date is the day the notice is given.
Deﬁned in this Act: amount, company, consolidated imputation group, credit transfer notice, imputation credit Compare: 2004 No 35 s ME 11(1)(ed), (2)(cc) OP 17 Consolidated ICA resident withholding tax withheld (1) (2) (3) Credit A consolidated imputation group has an imputation credit for resident withholding tax (RWT) that is treated under section RA 9(1)(b) (Treatment of amounts withheld as received) as derived by a group company.
Table reference The imputation credit in subsection (1) is referred to in table imputation credits of consolidated imputation groups, O19: row 12 (RWT withheld).

Credit date The credit date is the day the interest or dividend relating to the resident passive income is paid.
Deﬁned in this Act: company, consolidated imputation group, dividend, imput- ation credit, interest, pay, resident passive income, RWT Compare: 2004 No 35 s ME 11(1)(j), (2)(c) OP 18 Consolidated ICA transfer from group company’s FDP account (1) (2) Credit A consolidated imputation group has an imputation credit for an amount equal to the amount of an FDP debit under sec- tion OC 18 (FDPA transfer to imputation credit account) trans- ferred from the FDP account of a group company.
Table references The imputation credit in subsection (1) is referred to in table imputation credits of consolidated imputation groups, O19: row 13 (transfer from group company’s FDP account).

The FDP debit in subsection (1) is referred to in table O4: FDP debits, row 7 (transfer to imputation credit account).

2105 Part O s OP 19 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Credit date The credit date is the same as the debit date for the transfer.
Deﬁned in this Act: amount, company, consolidated imputation group, FDP account, FDP debit, imputation credit Compare: 2004 No 35 s ME 11(1)(fb), (2)(fb) OP 19 Consolidated ICA transfer from group’s FDP account (1) (2) (3) Credit A consolidated imputation group has an imputation credit for an amount equal to the amount transferred under section FM 30(3) and (4) (Application of certain provisions to consoli- dated groups) from the FDP account of a consolidated group.
Table reference The imputation credit in subsection (1) is referred to in table imputation credits of consolidated imputation groups, O19: row 14 (transfer from consolidated group’s FDP account).

Credit date The credit date is the same as the debit date for the transfer.
Deﬁned in this Act: amount, consolidated group, consolidated imputation group, FDP account, imputation credit Compare: 2004 No 35 s ME 11(1)(g), (2)(d) OP 20 Consolidated ICA transfer from group company’s policyholder credit account Credit A consolidated imputation group has an imputation credit for an amount equal to the amount of a debit under section OJ 9 (PCA transfer to imputation credit account) for the transfer of a credit balance from a group company’s policyholder credit account.
Table references The imputation credit in subsection (1) is referred to in table imputation credits of consolidated imputation groups, O19: row 15 (transfer from company’s policyholder credit account).

The policyholder debit in subsection (1) is referred to in table O14: policyholder debits, row 3 (transfer to imputation credit account).

(1) (2) 2106 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 22 (3) Credit date The credit date is the same as the debit date for the transfer.
Deﬁned in this Act: amount, company, consolidated imputation group, imput- ation credit, policyholder credit account Compare: 2004 No 35 s ME 11(1)(jb), (2)(eb) OP 21 Consolidated ICA transfer from group’s policyholder credit account (1) (2) (3) Credit A consolidated imputation group has an imputation credit for an amount equal to the amount of a debit under section OP 116 for a transfer from the policyholder credit account of a consolidated group.
Table references The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 16 (transfer from group’s policyholder credit account).

The policyholder debit in subsection (1) is referred to in table O28: policyholder debits of consolidated groups, row 3 (trans- fer to imputation credit account).

Credit date The credit date is the same as the debit date for the transfer.
Deﬁned in this Act: amount, consolidated group, consolidated imputation group, imputation credit, policyholder credit account Compare: 2004 No 35 s ME 11(1)(k), (2)(d) OP 22 Consolidated ICA group company’s credit (1) Credit A consolidated imputation group has an imputation credit for the amount of a credit that arises when— (a) an imputation credit described in a row of table O1: im- putation credits, arises in the imputation credit account of a group company; and an imputation debit described in a row of table O20: imputation debits of consolidated imputation groups, arises in the imputation credit account of the group; and (b) 2107 Part O s OP 23 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (c) the debit is not offset by a credit arising in the group account before or on the same date on which the credit arose in the group company’s account.
Table reference The imputation credit in subsection (1) is referred to table O19: imputation credits of consolidated imputation groups, row 17 (group company’s credit).
(b) (c) Offsetting debits For the purposes of subsection (1)(c), to determine whether a debit has been offset by a credit in the group account,— (a) credits are treated as reducing debits in the order in which the credits arise; and a credit, whether some or all, is counted only once in determining whether a debit has been offset; and credits in the accounts of more than 1 group company become a credit to the group account— (i) (ii) in the order of their credit date; and as chosen by the group, if credits arise on the same credit date; and on a pro rata basis, if no election is made under subparagraph (ii).
(iii) (4) Credit date The credit date is the same as the debit date for the debit to the group account.
Deﬁned in this Act: amount, company, consolidated imputation group, imput- ation credit, imputation credit account, imputation debit Compare: 2004 No 35 s ME 13(2), (3) OP 23 Consolidated ICA elimination of double debit When this section applies This section applies when an imputation debit in a consoli- dated imputation group’s imputation credit account under sec- tion OP 42 has the effect of cancelling an imputation credit under section OP 8. Credit The consolidated imputation group has an imputation credit for an amount that equals the amount of the debit referred to in subsection (1), and either— (1) (2) 2108 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 24 (a) (b) another debit arises under section OP 32 for a refund or transfer of the deposit on a debit date that is after the debit date for the debit for loss of shareholder continu- ity; or the deposit is taken into account under sections RP 19 and RP 20 (which relate to transfers from tax pooling accounts) in determining the balance of the company’s tax account with the Commissioner after the debit date for the debit for loss of shareholder continuity.
(3) (4) Table references The table references are as follows: (a) the imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imput- ation groups, row 16 (debit for loss of shareholder con- tinuity): the imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imput- ation groups, row 3 (deposit in tax pooling account): the imputation credit in subsection (2) is referred to in table O19: imputation credits of consolidated imput- ation groups, row 18 (elimination of double debit): the imputation debit in subsection (2)(a) is referred to in table O20: imputation debits of consolidated imput- ation groups, row 6 (refund from tax pooling account).
(b) (c) (d) Credit date The credit date is the day— (a) (b) the deposit is refunded; or a credit arises in the company’s tax account with the Commissioner.
Deﬁned in this Act: amount, Commissioner, company, consolidated imputation group, deposit, imputation credit, imputation credit account, imputation debit, shareholder, tax account with the Commissioner Compare: 2004 No 35 s ME 11(1A), (2A) OP 24 Consolidated ICA reversal of tax advantage arrangement (1) When this section applies This section applies when it is established that an imputation credit in a consolidated imputation group’s imputation credit 2109 Part O s OP 25 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) account was incorrectly determined to be the subject of an ar- rangement to obtain a tax advantage.
Credit The consolidated imputation group has an imputation credit for an amount equal to the amount of a debit in the group’s account under section OP 46.

Table references The imputation credit in subsection (2) is referred to in table O19: imputation credits of consolidated imputation groups, row 19 (reversal of tax advantage arrangement).

The imput- ation debit in subsection (2) is referred to in table O20: imput- ation debits of consolidated imputation groups, row 20 (tax advantage arrangement).
Credit date The credit date is the same as the debit date for the debit.
Deﬁned in this Act: amount, consolidated imputation group, imputation credit, imputation debit, tax advantage Compare: 2004 No 35 s ME 11(1)(i), (2)(e) OP 25 Consolidated ICA non-resident withholding tax withheld Credit A consolidated imputation group that includes an Australian ICA company has an imputation credit for an amount of non- resident passive income derived by the company from which non-resident withholding tax (NRWT) is withheld.
Table reference The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 20 (NRWT paid).

Credit date The credit date is the day the amount of tax is withheld.
Deﬁned in this Act: amount, Australian ICA company, consolidated imputation group, imputation credit, non-resident passive income, NRWT, pay Compare: 2004 No 35 s ME 11(1B)(a), (2B)(a) (1) (2) (3) 2110 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 27 OP 26 Consolidated ICA payment of amount of tax for schedular payment (1) (2) (3) Credit A consolidated imputation group that includes an Australian ICA company has an imputation credit for the amount of tax for a schedular payment paid to the company as a non-resident contractor.
Table reference The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 21 (amount of tax for schedular payment).

Credit date The credit date is the day the amount of tax is withheld.
Deﬁned in this Act: amount of tax, Australian ICA company, consolidated im- putation group, imputation credit, non-resident contractor, schedular payment Compare: 2004 No 35 s ME 11(1B)(b), (2B)(b) OP 27 Consolidated ICA payment of schedular income tax (1) (2) (3) Credit A consolidated imputation group that includes an Australian ICA company has an imputation credit for the amount of a payment by the company of schedular income tax for income derived under section CR 3, CV 16, or CV 17 (which relate to non-resident insurers, shippers, and ﬁlm renters).
Table reference The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 22 (payment of schedular income tax).

Credit date The credit date is the day the schedular income tax is paid.
Deﬁned in this Act: amount, Australian ICA company, consolidated imputation group, imputation credit, imputation credit account, income, pay, schedular in- come tax Compare: 2004 No 35 s ME 11(1B)(c), (2B)(c) 2111 Part O s OP 28 Income Tax Act 2007 Reprinted as at 1 January 2010 Imputation debits of consolidated imputation groups OP 28 Consolidated ICA payment of dividend (1) (2) (3) (4) Debit A consolidated imputation group has an imputation debit for an amount that equals the amount of an imputation credit at- tached to a dividend paid by a group company.
Table reference The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 2 (payment of dividend).

Debit date The debit date is the day the dividend is paid.

Arrangement for dividend from another country Section GB 38 (When sections GB 35 to GB 37 apply to con- solidated groups) may apply to treat an amount as a debit under this section.
Deﬁned in this Act: amount, company, consolidated imputation group, divi- dend, imputation credit, imputation debit, pay Compare: 2004 No 35 s ME 12(1)(a), (2)(a) OP 29 Consolidated ICA allocation of provisional tax Debit A consolidated imputation group has an imputation debit for an amount of provisional tax allocated by the group under sec- tion RC 32 (Wholly-owned groups of companies) to an under- paid company.
Table reference The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 3 (allocation of provisional tax).

Debit date The debit date is the day the Commissioner is notiﬁed of the allocation.
Deﬁned in this Act: amount, Commissioner, company, consolidated imputation group, imputation debit, notify, provisional tax Compare: 2004 No 35 s ME 12(1)(c), (2)(c) (1) (2) (3) 2112 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 31 OP 30 Consolidated ICA refund of income tax (1) (2) (3) (4) (5) Debit A consolidated imputation group has an imputation debit for the amount of a refund of income tax or provisional tax paid to the group.

Subsection (2) overrides this subsection.


No debit The debit does not include a refund of income tax paid before a debit arises under section OP 42 to the extent to which the amount of the refund is less than the amount of the debit.

Table references The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 4 (refund of income tax).
The imputation debit in subsec- tion (2) is referred to in table O20: imputation debits of con- solidated imputation groups, row 16 (debit for loss of share- holder continuity).

Debit date The debit date is the day the refund is made.

Relationship with section OP 35 This section does not apply to an amount that gives rise to a debit under section OP 35.
Deﬁned in this Act: amount, consolidated imputation group, imputation debit, income tax, pay, provisional tax Compare: 2004 No 35 s ME 12(1)(d), (2)(d) Section OP 30(5) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 452(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 30(5): added (with effect on 1 April 2008), on 6 October 2009, by section 452(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OP 31 Consolidated ICA amount applied to pay other taxes (1) Debit A consolidated imputation group has an imputation debit for an amount of overpaid income tax that is applied to pay an amount due under the Inland Revenue Acts.

Subsection (2) overrides this subsection.


2113 Part O s OP 32 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (4) (5) No debit The debit referred to in subsection (1) does not include over- paid income tax to the extent to which it is— (a) (b) applied to satisfy an income tax liability; or for an amount paid before an imputation debit arises under section OP 42, no more than the debit for loss of shareholder continuity.
Table references The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 5 (amount applied to pay other taxes).

The imputation debit in subsection (2) is referred to in table O20: imputation debits of consolidated imputation groups, row 16 (debit for loss of shareholder continuity).

Debit date The debit date is the day the amount is applied.
Relationship with section OP 35 This section does not apply to an amount that gives rise to a debit under section OP 35.
Deﬁned in this Act: amount, company, consolidated imputation group, imput- ation debit, income tax, income tax liability, Inland Revenue Acts, pay, share- holder Compare: 2004 No 35 s ME 12(1)(l), (2)(k) Section OP 31(5) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 453(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 31(5): added (with effect on 1 April 2008), on 6 October 2009, by section 453(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 32 Consolidated ICA refund from tax pooling account When this section applies This section applies in a tax year when a consolidated imput- ation group pays an intermediary an amount that gives rise to an imputation credit under sections OP 8 and OP 9, and the amount is later refunded by the intermediary from the tax pool- ing account.
(1) 2114 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 33 (2) (3) (4) Debit The consolidated imputation group has an imputation debit for the tax year for the amount of the refund.

Table references The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 3 (deposit in tax pooling account) or row 4 (transfer from tax pooling account).
The imputation debit in subsection (2) is referred to in table O20: imputation debits of consolidated imputation groups, row 6 (refund from tax pooling account).
Debit date The debit date for the debit is— (a) the last day of the previous tax year to the extent of the amount of the debit that is no more than the credit balance in the imputation credit account on that date: the day the refund is made to the extent of the remain- ing amount of the debit that is no more than the credit balance in the imputation credit account on the day of refund: the last day of the previous tax year for the remainder of the imputation debit.
(b) (c) Deﬁned in this Act: amount, consolidated imputation group, deposit, imput- ation credit, imputation credit account, imputation debit, intermediary, pay, tax pooling account, tax year Compare: 2004 No 35 s ME 12(1)(da), (2)(da) OP 33 Consolidated ICA transfer to tax pooling account (1) When this section applies This section applies in a tax year when a consolidated im- putation group transfers to another person an entitlement to funds in a tax pooling account that gives rise to an imputation credit under the following sections as described in the follow- ing rows of table O19: imputation credits of consolidated im- putation groups: (a) (b) section OP 8, row 3 (deposit in tax pooling account): section OP 9, row 4 (transfer from tax pooling account).
(2) Debit The consolidated imputation group has an imputation debit for the amount of the transfer.

2115 Part O s OP 34 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) Table reference The imputation debit in subsection (2) is referred to in table O20: imputation debits of consolidated imputation groups, row 7 (transfer to tax pooling account).
Debit date The debit date for the debit is— (a) the last day of the previous tax year to the extent of the amount of the debit that is no more than the credit balance in the imputation credit account on that date: the day the refund is made to the extent of the remain- ing amount of the debit that is no more than the credit balance in the imputation credit account on the day of refund: the last day of the previous tax year for the remainder of the imputation debit.
(b) (c) Deﬁned in this Act: amount, consolidated imputation group, imputation credit, imputation credit account, imputation debit, tax pooling account, tax year Compare: 2004 No 35 s ME 12(1)(db), (2)(da) OP 34 Consolidated ICA refund of FDP Debit A consolidated imputation group has an imputation debit for the amount of a refund of FDP that relates to a dividend de- rived by a group company at a time when— (a) the group company is part of a consolidated group with- out an FDP account; or the group company does not have an FDP account and is not part of a consolidated group.
(b) Table reference The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 8 (refund of FDP).

Debit date The debit date is the day the refund is made.
Deﬁned in this Act: amount, company, consolidated group, consolidated im- putation group, dividend, FDP, FDP account, imputation debit Compare: 2004 No 35 s ME 12(1)(f), (2)(d) (1) (2) (3) 2116 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 35 OP 35 Consolidated ICA refund of tax credit (1) Debit A consolidated imputation group has an imputation debit for— the amount of a transfer under section LA 6(2)(d) (Re- (a) maining refundable credits: PAYE, RWT, and certain other items) to the extent to which the transfer does not lead to a refund of income tax: the amount of a refund under section LA 6(2)(e): an amount used under section LH 2(6) (Tax credits re- lating to expenditure on research and development) to pay an amount payable under an Inland Revenue Act to the extent to which the use does not lead to a refund of income tax.
(b) (c) Exclusion (1B) Despite subsection (1), a consolidated imputation group does not have an imputation debit to the extent to which— (a) the amount transferred, refunded, or used is a tax credit for a payment of FDP relating to a dividend derived by a group company; and the dividend was derived when the company— (i) had an FDP account and was not part of a con- solidated group; or (b) (2) (3) (ii) was part of a consolidated group with an FDP account.
Table reference The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 9 (refund of tax credit).
Debit date The debit date is— (a) for a debit referred to in subsection (1)(a), the day the amount is transferred: for a debit referred to in subsection (1)(b), the day the amount is refunded: (b) 2117 Part O s OP 36 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) for a debit referred to in subsection (1)(c), the day the amount is applied.
Deﬁned in this Act: amount, company, consolidated group, consolidated im- putation group, dividend, FDP, FDP account, imputation debit, pay, tax credit Compare: 2004 No 35 s ME 12(1)(f), (2)(d) Section OP 35(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 455(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 35(1B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 455(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 35(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 455(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 35 list of deﬁned terms FDP: inserted (with effect on 1 April 2008), on 6 October 2009, by section 455(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 35 list of deﬁned terms pay: added (with effect on 1 April 2008), on 6 October 2009, by section 455(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 35 list of deﬁned terms tax credit: added (with effect on 1 April 2008), on 6 October 2009, by section 455(3) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 36 Consolidated ICA overpayment of FDP Debit A consolidated imputation group has an imputation debit for the amount of an overpayment of FDP relating to a dividend derived by a group company in the following circumstances: the dividend is derived by the company at a time (a) when— (i) the company is part of a consolidated group with- out an FDP account; or the company does not have an FDP account and is not part of a consolidated group; and (ii) (b) (c) the overpayment is applied to pay an amount due under the Inland Revenue Acts other than a liability for in- come tax or FDP; and the group does not have an FDP account when the amount is applied.
(1) 2118 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 37 (2) (3) Table reference The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 10 (overpayment of FDP).

Debit date The debit date is the day the amount is applied.
Deﬁned in this Act: amount, company, consolidated group, consolidated imput- ation group, dividend, FDP, FDP account, imputation debit, income tax, Inland Revenue Acts, pay Compare: 2004 No 35 s ME 12(1)(m), (2)(k) OP 37 Consolidated ICA group company’s debit (1) (2) (3) (4) Debit A consolidated imputation group has an imputation debit for an amount to the extent to which the amount would, in the absence of subsection (3), give rise to— (a) an imputation debit described in a row of table O2: im- putation debits, in the imputation credit account of a group company; and an imputation debit that would create or increase a debit balance in the group company’s imputation credit ac- count.
(b) Table reference The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 11 (group company’s debit).

No debit for group company The amount referred to in subsection (1) does not give rise to an imputation debit in the group company’s account although otherwise eligible to be one.
Debit date The debit date is the day that the amount would have been debited to the imputation credit account of the group company in the absence of subsection (3).
Deﬁned in this Act: amount, company, consolidated imputation group, imput- ation credit account, imputation debit Compare: 2004 No 35 s ME 12(1)(k), (2)(j) 2119 Part O s OP 38 Income Tax Act 2007 Reprinted as at 1 January 2010 OP 38 Consolidated ICA transfer for net foreign attributed income [Repealed] Section OP 38: repealed (with effect on 30 June 2009), on 6 October 2009, by section 456(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 39 Consolidated ICA replacement payment by company under share-lending arrangement (1) (2) (3) Debit A consolidated imputation group has an imputation debit for the amount of an imputation credit attached under section OB 64 (Replacement payments) to a replacement payment paid under a share-lending arrangement by a company that is part of the consolidated imputation group at the time of payment.
Table reference The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 13 (replacement payment under share-lending arrange- ment).

Debit date The debit date is the day the replacement payment is paid.
Deﬁned in this Act: amount, company, consolidated imputation group, im- putation credit, imputation debit, pay, replacement payment, share-lending ar- rangement Compare: 2004 No 35 s ME 12(1)(ab), (2)(ab) OP 40 Consolidated ICA returning share transfer Debit A consolidated imputation group has an imputation debit for the amount of an imputation credit attached to a dividend paid to a company if— (a) at the time of payment, the company is part of the con- solidated imputation group; and the dividend is paid to the company as a share user, or a person associated with a share user, in a returning share transfer that is not a share-lending arrangement.
(b) (1) 2120 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 42 (2) (3) Table reference The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 14 (returning share transfer).

Debit date The debit date is the day the dividend is paid.
Deﬁned in this Act: amount, associated person, company, consolidated imput- ation group, dividend, imputation credit, imputation debit, pay, returning share transfer, share-lending arrangement, share user Compare: 2004 No 35 s ME 12(1)(ac), (2)(ac) OP 41 Consolidated ICA credit transfer by company (1) (2) (3) Debit A consolidated imputation group has an imputation debit for the amount of an imputation credit attached to a dividend paid to a company if— (a) at the time of payment, the company is a part of the consolidated imputation group; and the amount is shown in a credit transfer notice given by the company.
(b) Table reference The imputation debit in subsection (1) is referred to in table imputation debits of consolidated imputation groups, O20: row 15 (credit transfer).

Debit date The debit date is the day the dividend is paid.
Deﬁned in this Act: amount, company, consolidated imputation group, credit transfer notice, dividend, imputation credit, imputation debit, pay Compare: 2004 No 35 s ME 12(1)(ad), (2)(ac) OP 42 Consolidated ICA debit for loss of shareholder continuity (1) Debit A consolidated imputation group has an imputation debit for the amount of an imputation credit retained in the group’s im- putation credit account and unused at the time at which share- holder continuity is lost.
2121 Part O s OP 43 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Table reference The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 16 (debit for loss of shareholder continuity).

When debit arises The debit arises at the time shareholder continuity is lost.
Deﬁned in this Act: amount, consolidated imputation group, imputation credit, imputation credit account, imputation debit, shareholder Compare: 2004 No 35 ss ME 12(1)(h), (2)(g), ME 13(2) Section OP 42(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 95(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section OP 42(3) heading: substituted (with effect on 1 April 2008), on 7 De- cember 2009, by section 95(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section OP 42(3): substituted (with effect on 1 April 2008), on 7 December 2009, by section 95(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
OP 43 Consolidated ICA breach of imputation ratio Debit A consolidated imputation group has an imputation debit for a tax year for the amount of a debit under section OB 43 (ICA breach of imputation ratio) that would arise in the imputation credit account of a group company in the absence of section OP 5(3).

Table references The group’s imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 17 (breach of imputation ratio).
The group com- pany’s imputation debit in subsection (1) is referred to in table O2: imputation debits, row 16 (breach of imputation ratio).

Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, company, consolidated imputation group, imput- ation credit account, imputation debit, tax year Compare: 2004 No 35 s ME 12(1)(e), (2)(e) (1) (2) (3) 2122 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 44 OP 44 Consolidated ICA transfer to policyholder credit account (1) (2) (3) (4) (5) (6) (7) Election The nominated company of a consolidated imputation group may choose to transfer some or all of a credit balance in the group’s imputation credit account to the policyholder credit account of a group company.
Subsection (2) overrides this subsection.

Restriction Subsection (1) does not apply to a consolidation imputation group that is also a resident imputation subgroup.

Method and result of election The company makes the election by recording the credit bal- ance transferred as— (a) (b) a debit in the group’s imputation credit account; and a credit in the group’s policyholder credit account under section OP 110.
Table references The imputation debit in subsection (3)(a) is referred to in table O20: imputation debits of consolidated imputation groups, row 18 (transfer to policyholder credit account).

The policy- holder credit in subsection (3)(b) is referred to in table O27: policyholder credits of consolidated groups, row 2 (transfer from imputation credit account).

Debit date The debit date is the day the election is made.
Mandatory transfer for group with non-standard accounting year Despite the absence of an election during the tax year, a con- solidated imputation group that has adopted a non-standard ac- counting year is treated as having chosen at the end of the tax year to transfer the credit described in subsection (7) from the imputation credit account to the policyholder credit account.
Credit The consolidated imputation group is treated as having made an election for a tax year to the extent to which— 2123 Part O s OP 44 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) (b) (c) during the tax year, or no later than the end of the ac- counting year corresponding to the tax year, a credit arises under— (i) section OP 7: table O19 (imputation credits of consolidated imputation groups), row 2 (income tax paid for group tax liability) for a payment of provisional tax; or table O19 (imputation credits section OP 14: of consolidated imputation groups), row 9 (FDP paid by group company) for a payment of FDP; and (ii) during the tax year, the credit has not been cancelled by a later debit arising under— (i) section OP 30: table O20 (imputation debits of consolidated imputation groups), row 4 (refund of income tax or provisional tax to group) for a refund of provisional tax paid during the account- ing year: section OP 34: table O20 (imputation debits of consolidated imputation groups), row 8 (refund of FDP when no FDP account) for a refund of FDP paid during the accounting year; and the credit has not been included in a credit balance trans- ferred by an election under subsection (3).
(ii) Ordering rule For the purpose of determining under subsection (7)(b) whether a debit has cancelled a credit, debits are treated as cancelling credits in the order in which the credits arise.
Deﬁned in this Act: accounting year, company, consolidated imputation group, FDP, imputation credit account, imputation debit, nominated company, pay, policyholder credit account, provisional tax, resident imputation subgroup, tax year Compare: 2004 No 35 ss ME 12(1)(b), (2)(b), ME 14(1) Section OP 44(6) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 457(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 44(6): added (with effect on 1 April 2008), on 6 October 2009, by section 457(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

(8) 2124 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 45 Section OP 44(7) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 457(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 44(7): added (with effect on 1 April 2008), on 6 October 2009, by section 457(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 44(8) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 457(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 44(8): added (with effect on 1 April 2008), on 6 October 2009, by section 457(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 44 list of deﬁned terms accounting year: inserted (with effect on 1 April 2008), on 6 October 2009, by section 457(2) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 44 list of deﬁned terms FDP: inserted (with effect on 1 April 2008), on 6 October 2009, by section 457(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 44 list of deﬁned terms pay: inserted (with effect on 1 April 2008), on 6 October 2009, by section 457(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 44 list of deﬁned terms provisional tax: inserted (with effect on 1 April 2008), on 6 October 2009, by section 457(2) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section OP 44 list of deﬁned terms tax year: added (with effect on 1 April 2008), on 6 October 2009, by section 457(2) of the Taxation (International Tax- ation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 45 Consolidated ICA redemption debit (1) (2) Debit A consolidated imputation group has an imputation debit for the amount of a redemption debit.
When redemption debit arises A redemption debit arises when— (a) a group company that is not an Australian ICA company is— (i) (ii) the manager of a unit trust; or the trustee or manager of a group investment fund; and (b) the group company derives a dividend from the redemp- tion or cancellation of— 2125 Part O s OP 45 Income Tax Act 2007 Reprinted as at 1 January 2010 (i) (ii) a unit issued by the unit trust; or an interest of an investor in the group investment fund; and the company has acquired the unit or interest in the or- dinary course of its management activities for the unit trust or group investment fund; and the unit or interest had been acquired by the company on the same terms as those offered to the investors in the unit trust or group investment fund.
(c) (d) Calculating amount The debit is for the greater of the amounts described in sub- sections (4) and (6) calculated for the income year referred to in subsection (8) in which the group company derives the divi- dend referred to in subsection (2)(b).

First amount The ﬁrst amount is calculated using the formula— credits attached – imputation debits.
Deﬁnition of items in formula In the formula in subsection (4),— (a) credits attached is the total amount of all imputation credits and FDP credits attached to dividends derived by the group company in the income year in the circum- stances set out in subsection (2): imputation debits is the amount of imputation debits in the income year under section OP 42 in the group’s imputation credit account.
(b) (3) (4) (5) Second amount The second amount is calculated using the formula— (6) Deﬁnition of items in formula In the formula in subsection (6),— (a) total dividends is the total amount of all dividends derived in the circumstances set out in subsection (2), including imputation credits and FDP credits attached to the dividends: (7) 2126 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 46 (b) (c) (d) taxable income is the taxable income of the group company for the tax year corresponding to the income year in which the dividends are derived: tax liability is the group company’s income tax liability for the tax year corresponding to the income year in which the dividends are derived: continuity debits is the amount of imputation credits attached to the dividends that have been cancelled by an imputation debit under section OP 42.
(8) (9) Table references The table references are as follows: (a) (b) (c) the imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imput- ation groups, row 19 (redemption debit): the imputation debit in subsection (5)(b) is referred to in table O20: imputation debits of consolidated imput- ation groups, row 16 (debit for loss of shareholder con- tinuity): the imputation debit in subsection (7)(d) is referred to in table O20: imputation debits of consolidated imput- ation groups, row 16 (debit for loss of shareholder con- tinuity).
Debit date The debit date is the day the company or the group’s nomin- ated company ﬁles the return of income for the tax year corres- ponding to the income year in which the dividend is derived.
Deﬁned in this Act: amount, Australian ICA company, company, consolidated imputation group, dividend, FDP credit, group investment fund, imputation credit, imputation credit account, imputation debit, income tax liability, income year, investor, nominated company, return of income, tax year, taxable income, trustee, unit trust Compare: 2004 No 35 s ME 41 OP 46 Consolidated ICA tax advantage arrangement (1) Debit A consolidated imputation group has an imputation debit for the amount of a debit for a tax advantage arrangement deter- mined under sections GB 35 and GB 36 (which relate to im- putation arrangements to obtain a tax advantage).
2127 Part O s OP 47 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Table reference The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 20 (tax advantage arrangement).

Debit date The debit date is the last day of the tax year in which the ar- rangement began.
Deﬁned in this Act: amount, arrangement, consolidated imputation group, im- putation debit, tax advantage, tax year Compare: 2004 No 35 s ME 12(1)(i), (2)(h) OP 47 Consolidated ICA ﬁnal balance (1) (2) (3) Debit A consolidated imputation group has an imputation debit for a credit balance in the imputation credit account when the group stops being a consolidated imputation group.
Table reference The imputation debit in subsection (1) is referred to in table imputation debits of consolidated imputation groups, O20: row 21 (ﬁnal balance).

Debit date The debit date is the day before the group stops being a con- solidated imputation group.
Deﬁned in this Act: consolidated imputation group, imputation credit account, imputation debit Compare: 2004 No 35 s ME 12(1)(j), (2)(h) OP 48 Consolidated ICA refund of NRWT Debit A consolidated imputation group that includes an Australian ICA company has an imputation debit for the amount of a re- fund of NRWT that gave rise to an imputation credit under section OP 25.
Table references The imputation debit in subsection (1) is referred to in table imputation debits of consolidated imputation groups, O20: row 22 (refund of NRWT).

The imputation credit in subsec- (1) (2) 2128 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 50 tion (1) is referred to in table O19: imputation credits of con- solidated imputation groups, row 20 (NRWT withheld).

(3) Debit date The debit date is the day the refund is made.
Deﬁned in this Act: amount, Australian ICA company, consolidated imputation group, imputation credit, imputation debit, NRWT Compare: 2004 No 35 s ME 12(1A)(a), (2A) OP 49 Consolidated ICA refund of amount of tax for schedular payment (1) (2) (3) Debit A consolidated imputation group that includes an Australian ICA company has an imputation debit for the amount of a re- fund of an amount of tax for a schedular payment that gave rise to an imputation credit under section OP 26.
Table references The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 23 (refund of amount of tax for schedular payment).

The imputation credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 21 (amount of tax for schedular payment).

Debit date The debit date is the day the refund is made.
Deﬁned in this Act: amount, amount of tax, Australian ICA company, consoli- dated imputation group, imputation credit, imputation debit, schedular payment Compare: 2004 No 35 s ME 12(1A)(b), (2A) OP 50 Consolidated ICA refund of schedular income tax (1) (2) Debit A consolidated imputation group that includes an Australian ICA company has an imputation debit for the amount of a re- fund of a payment of schedular income tax that gave rise to an imputation credit under section OP 27.
Table references The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 24 (refund of schedular income tax).

The imputation 2129 Part O s OP 50 Income Tax Act 2007 Reprinted as at 1 January 2010 credit in subsection (1) is referred to in table O19: imputation credits of consolidated imputation groups, row 22 (payment of schedular income tax).

Debit date The debit date is the day the refund is made.
Deﬁned in this Act: amount, Australian ICA company, consolidated imputation group, imputation credit, imputation debit, income tax, pay, schedular income tax Compare: 2004 No 35 s ME 12(1A)(c), (2A) (3) Table O19 imputation credits of consolidated imputation groups Row Imputation credit Credit date Opening credit balance 1 April or when group starts Income tax paid for group tax liability Group funds paid into tax pooling account day of payment day of payment Further deﬁned section OA 7 section OP 7 section OP 8 Transfer from tax pooling account day of credit refund section OP 9 Allocation from excess company day of notice of allocation section OP 10 Further income tax paid day of 6B Tax credit for research and development expenditure payment day return ﬁled section OP 11 section OP 11B.
7 Imputation credit attached to dividend derived day on which dividend is paid section OP 12 2130 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 50 8 9 FDP credit attached to dividend derived day on which dividend is paid section OP 13 [Repealed] 10 Replacement payment paid under share-lending arrangement 11 Imputation credit attached to dividend and shown in credit transfer notice 12 RWT withheld 13 14 15 16 Transfer from group company’s FDP account Transfer from consolidated group’s FDP account Transfer from company’s policyholder account Transfer from consolidated group’s policyholder credit account day of payment section OP 15 day on which notice is given section OP 16 day on which interest is paid section OP 17 debit day for transfer section OP 18 debit date for transfer section OP 19 debit date for transfer section OP 20 debit date for transfer section OP 21 17 Group company’s credit set out in section O 22 section OP 22 2131 Part O s OP 50 Income Tax Act 2007 18 Debit for loss of day of refund shareholder continuity that cancels credit for tax pooling account deposit that is refunded Reprinted as at 1 January 2010 section OP 23 19 Reversal of debt for tax advantage arrangement debit day of debit section OP 24 20 NRWT on non-resident withholding income derived by group company that is Australian ICA company 21 Amount of tax for schedular payment to group company that is also Australian ICA company 22 Schedular income tax paid by group company that is Australian ICA company day
 on which amount is withheld section OP 25 day on which amount is withheld section OP 26 day of payment section OP 27 Table O19 row 6B: inserted, on 1 April 2008, by section 516 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Table O19 row 9: repealed (with effect on 30 June 2009), on 6 October 2009, by section 459(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O20 imputation debits of consolidated imputation groups Row Imputation debit Debit date 1 Opening debit balance 1 April or when group starts Further deﬁned section OA 7 2132 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 50 day of payment section OP 28 day of notice of allocation section OP 29 day of refund section OP 30 day of application section OP 31 Imputation credit attached to dividend paid by group company Provisional tax allocated by group to underpaid company Refund of income tax or provisional tax to group Income tax overpaid that is applied to satisfy amount of tax, other than income tax, due by group company Refund from tax pooling account set out in section OP 32 Transfer to another taxpayer of funds in tax pooling account set out in section OP 33 Refund of FDP when no FDP account day of refund Transfer, refund, or use of tax credit day of transfer, refund, or use section OP 32 section OP 33 section OP 34 section OP 35 day of application section OP 36 10 Overpaid FDP applied, when group does not have FDP account, to satisfy amount due that is not income tax or FDP 2133 Part O s OP 50 Income Tax Act 2007 Reprinted as at 1 January 2010 11 Debit that would increase debit balance for group company 12 [Repealed] 13 Credit attached to replacement payment under share-lending arrangement 14 Credit attached to dividend shown in returning share transfer 15 Credit attached to dividend and shown in credit transfer notice set out in section 37 section OP 37 day of payment
 section OP 39 day of payment section OP 40 day of payment section OP 41 16 Debit for loss of shareholder continuity time of loss of continuity section OP 42 17 Debit for breach of imputation ratio 31 March 18 Transfer to policyholder credit account of group or group company set out in section OP 44 19 Redemption debit for unit trust or group investment fund for income year 20 Debit for tax arrangement day on which return of income for income year is ﬁled last day of tax year in which arrangement began
 section OP 43 section OP 44 section OP 45 section OP 46 2134 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 50 21 Credit balance of group’s imputation credit account when group stops being consolidated imputation group 22 Refund of NRWT to group company that is Australian ICA company day of cessation section OP 47 day of refund section OP 48 23 Refund of amount of tax day of refund section OP 49 for schedular payment to group company that is Australian ICA company 24 Refund of schedular income tax to group company that is Australian ICA company day of refund section OP 50 Table O20 row 9: substituted (with effect on 1 April 2008), on 6 October 2009, by section 460(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O20 row 12: repealed (with effect on 30 June 2009), on 6 October 2009, by section 460(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Table O20 row 18: amended (with effect on 1 April 2008), on 6 October 2009, by section 460(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O20 row 20: amended (with effect on 1 April 2008), on 7 December 2009, by section 96 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
2135 Part O s OP 51 Income Tax Act 2007 Reprinted as at 1 January 2010 Consolidated groups and FDP accounts Introductory provisions OP 51 FDP accounts of consolidated FDP groups (1) (2) (3) Consolidated group account A consolidated group is a consolidated FDP group for a tax year if— (a) a group company is a foreign dividend payment account (FDPA) company at a time during the tax year; or the group chooses to maintain an FDP account.
(b) Effect of election If a consolidated FDP group makes an election under subsec- tion (1)(b), it must maintain the FDP account referred to in section OC 2 (FDP accounts) from the date of election.
Notifying Commissioner The nominated company of a consolidated FDP group must notify the Commissioner of an election under subsection (1)(b)— (a) (b) Deﬁned in this Act: Commissioner, company, consolidated FDP group, con- solidated group, FDP account, FDPA company, nominated company, notify, tax year Compare: 2004 No 35 s MG 13(1) no later than 21 days after the day of election; or by a later date if the Commissioner allows.
OP 52 Choosing to stop being consolidated FDP group Election The nominated company of a consolidated FDP group may choose that the group’s status as a consolidated FDP group is to end.

When election made The election referred to in subsection (1) may be made during a tax year that is later than the tax year in which the group chooses under section OP 51 to become a consolidated FDP group.
(1) (2) 2136 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 53 (3) When company’s status ends The election referred to in subsection (1) takes effect from the ﬁrst day of the tax year after the tax year in which the election referred to in subsection (2) is made, but only if,— (a) the group— (i) (ii) ﬁles an annual FDPA return for the year of elec- tion in the time allowed by section 71 of the Tax Administration Act 1994; and pays further FDP, if any, under section OC 30 (Payment of further FDP for closing debit bal- ance) for the year of election; and (b) no group company is an FDPA company in the tax year after the year of election.
Deﬁned in this Act: annual FDPA return, company, consolidated FDP group, FDPA company, further FDP, nominated company, pay, tax year Compare: 2004 No 35 s MG 2(4), (5) OP 53 When group company emigrates (1) (2) (3) When this section applies This section applies when an FDPA company in a consolidated FDP group is an emigrating company.

Status ends The group’s status as a consolidated FDP group ends at the time of emigration of the company.
Further payments and returns The consolidated FDP group must— (a) (b) provide the annual FDPA return required for the group for the tax year in which the company becomes non- resident; and for a debit balance in the consolidated FDP group’s ac- count at the time of emigration, pay further FDP payable for the tax year of an amount equal to the debit balance.
Deﬁned in this Act: amount, annual FDPA return, consolidated FDP group, emigrating company, FDPA company, further FDP, non-resident, pay, tax year, time of emigration Compare: 2004 No 35 s MG 13(6), (7) 2137 Part O s OP 54 Income Tax Act 2007 Reprinted as at 1 January 2010 OP 54 When credits and debits arise only in consolidated FDP group accounts (1) (2) (3) (4) Credits to group accounts A credit listed in subsection (2) arises only in the FDP account of a consolidated FDP group and not in the FDP account of a group company.
Particular credits The credit referred to in subsection (1) is a credit under section OP 58, described in table O21, row 4.

Debits only in group accounts A debit listed in subsection (4) arises only in the FDP account of a consolidated FDP group and not in the FDP account of a group company.
Particular debits The debit referred to in subsection (3) is a debit under the fol- lowing sections and described in the following rows of table O22: FDP debits of consolidated FDP groups: (a) (b) (c) (d) Deﬁned in this Act: company, consolidated FDP group, FDP account Compare: 2004 No 35 s MG 16(1) section OP 64, row 2 (payment of dividend): section OP 66, row 4 (refund of FDP): section OP 68, row 6 (refund of tax credit): section OP 72, row 10 (breach of FDP ratio).
Section OP 54(2): substituted (with effect on 30 June 2009), on 6 October 2009, by section 461(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 55 Provisions applying to consolidated FDP groups Single company, tax liabilities The provisions set out in subsection (2) apply, modiﬁed as necessary, to a consolidated FDP group and to the FDP account of the group as if— (a) (b) the group were a single company; and a reference to a section of this Act were to an equivalent provision applicable to a consolidated group; and a reference to a company’s liability for further FDP, late payment penalty, or FDP penalty tax were a reference (c) (1) 2138 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 58 to a joint and several liability owed by group companies when the tax or penalty becomes payable.
(2) (3) Other provisions The provisions are— (a) sections OC 30 and OC 31 (which relate to further FDP); and sections 103, 104, 139B, 140C, 140D, and 181 of the Tax Administration Act 1994.

(b) Consolidation provisions Sections FM 3 and FM 4 (which relate to the liabilities of consolidated groups and group companies) overrides subsec- tion (1)(c).
Deﬁned in this Act: company, consolidated FDP group, consolidated group, FDP account, FDP penalty tax, further FDP, pay Compare: 2004 No 35 s MG 16A(2) FDP credits of consolidated FDP groups OP 56 Consolidated FDPA payment of FDP [Repealed] Section OP 56: repealed (with effect on 1 April 2009), on 6 October 2009, by section 462(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 57 Consolidated FDPA payment of further FDP [Repealed] Section OP 57: repealed (with effect on 1 April 2009), on 6 October 2009, by section 463(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OP 58 Consolidated FDPA dividend derived with FDP credit (1) (2) Credit A consolidated FDP group has an FDP credit for the amount of an FDP credit attached to a dividend derived by a group company.
Table reference The FDP credit in subsection (1) is referred to in table O21: FDP credits of consolidated FDP groups, row 4 (dividend de- rived with FDP credit).

2139 Part O s OP 59 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Credit date The credit date is the day the dividend is paid.
Deﬁned in this Act: amount, company, consolidated FDP group, dividend, FDP credit, pay Compare: 2004 No 35 s MG 14(1)(b), (2)(a) OP 59 Consolidated FDPA group company’s credit Credit A consolidated FDP group has an FDP credit for the amount of a credit arising as follows: (a) an FDP credit described in a row of table O3: FDP credits, arises in the FDP account of a group company; and an FDP debit described in a row of table O22: FDP debits of consolidated FDP groups, arises in the group FDP account; and the debit is not offset by a credit arising in the group account before or on the same date on which the credit arose in the group company’s account.
(b) (c) Table reference The FDP credit in subsection (1) is referred to in table O21: FDP credits of consolidated FDP groups, row 5 (group com- pany’s credits).
(b) (c) Offsetting debits For the purposes of subsection (1)(c), to determine whether the debit has been offset by a credit in the group account,— (a) credits are treated as reducing debits in the order in which the credits arise; and a credit, whether some or all, is counted only once in determining whether a debit has been offset; and credits in the accounts of more than 1 group company become a credit to the group account— (i) (ii) in the order of their credit date; and as chosen by the group, if credits arise on the same credit date; and on a pro rata basis, if no election is made under subparagraph (ii).
(iii) (1) (2) (3) 2140 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 62 (4) Credit date The credit date is immediately before the debit date for the debit to the group account.
Deﬁned in this Act: amount, company, consolidated FDP group, FDP account, FDP credit, FDP debit Compare: 2004 No 35 ss MG 14(1)(e), (2)(c), MG 16(2), (4) OP 60 Consolidated FDPA credit transfer to company (1) (2) (3) Credit A consolidated FDP group has an FDP credit for the amount of an FDP credit shown in a credit transfer notice given to a company that is part of the consolidated FDP group when the notice is given.
Table reference The FDP credit in subsection (1) is referred to in table O21: FDP credits of consolidated imputation groups, row 6 (credit transfer).

Credit date The credit date is the day the notice is given.
Deﬁned in this Act: amount, company, consolidated FDP group, credit transfer notice, FDP credit Compare: 2004 No 35 s MG 14(1)(bb), (2)(ab) OP 61 Consolidated FDPA transfer from group’s CTR account [Repealed] Section OP 61: repealed (with effect on 1 April 2009), on 6 October 2009, by section 464(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 62 Consolidated FDPA transfer for net foreign attributed income [Repealed] Section OP 62: repealed (with effect on 1 April 2009), on 6 October 2009, by section 465(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2141 Part O s OP 63 Income Tax Act 2007 Reprinted as at 1 January 2010 OP 63 Consolidated FDPA reversal of tax advantage arrangement (1) (2) (3) (4) When this section applies This section applies when it is established that an FDP credit in a consolidated FDP group’s FDP account was incorrectly determined to be the subject of an arrangement to obtain a tax advantage.

Credit The consolidated FDP group has an FDP credit for an amount equal to a debit in the group’s FDP account under section OP 76.
Table references The FDP credit in subsection (2) is referred to in table O21: FDP credits of consolidated FDP groups, row 9 (reversal of tax advantage arrangement).

The FDP debit in subsection (2) is referred to in table O22: FDP debits of consolidated FDP groups, row 14 (tax advantage arrangement).

Credit date The credit date is the same as the debit date of the debit.
Deﬁned in this Act: amount, consolidated FDP group, FDP account, FDP credit, tax advantage Compare: 2004 No 35 s MG 14(1)(d), (2)(b) FDP debits of consolidated FDP groups OP 64 Consolidated FDPA payment of dividend Debit A consolidated FDP group has an FDP debit for the amount of an FDP credit attached to a dividend paid by a group company that is part of the group when the dividend is paid.
Table reference The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 2 (payment of dividend).

(1) (2) 2142 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 66 (3) Debit date The debit date is the day the dividend is paid.
Deﬁned in this Act: amount, company, consolidated FDP group, dividend, FDP account, FDP credit, FDP debit, pay Compare: 2004 No 35 s MG 15(1)(a), (2)(a) OP 65 Consolidated FDPA credit transfer by company (1) (2) (3) Debit A consolidated FDP group has an FDP debit for the amount of an FDP credit attached to a dividend paid to a company if— (a) at the time of payment, the company is a part of the consolidated FDP group; and the amount is shown in a credit transfer notice given by the company.
(b) Table reference The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 3 (credit transfer notice).

Debit date The debit date is the day the dividend is paid.
Deﬁned in this Act: amount, consolidated FDP group, credit transfer notice, dividend, FDP credit, FDP debit, pay Compare: 2004 No 35 s MG 15(1)(ab), (2)(ab) OP 66 Consolidated FDPA refund of FDP (1) (2) Debit A consolidated FDP group has an FDP debit for a refund of FDP paid to a group company that is part of the group when it derived the dividend giving rise to the payment of FDP and the refund.

Subsection (2) overrides this subsection.


No debit A debit under subsection (1) does not arise if— (a) the payment of FDP giving rise to the refund was made before an FDP debit arises under section OP 73; and the debit for the refund is no more than the debit for loss of shareholder continuity.
(b) 2143 Part O s OP 67 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) Table references The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 4 (refund of FDP).

The FDP debit in subsection (2)(a) is referred to in table O22: FDP debits of consolidated FDP groups, row 11 (debit for loss of shareholder continuity).

Debit date The debit date is the day the refund is made.
Deﬁned in this Act: company, consolidated FDP group, dividend, FDP, FDP debit, pay, shareholder Compare: 2004 No 35 s MG 15(1)(d), (2)(d) OP 67 Consolidated FDPA overpayment of FDP Debit A consolidated FDP group has an FDP debit for an overpay- ment of FDP that is— (a) paid by a group company that is part of the group at the time it derived the dividend giving rise to the overpay- ment of FDP; and applied to pay an amount due under the Inland Revenue Acts.
(b) No debit Despite subsection (1), the debit does not include an overpay- ment of FDP to the extent to which it is— (a) (b) applied to satisfy a liability for FDP; or for a payment of FDP before an FDP debit arises under section OP 73, no more than the debit for loss of share- holder continuity.

Table references The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 5 (overpayment of FDP).
The FDP debit in subsection (2)(b) is referred to in table O22: FDP debits of consolidated FDP groups, row 11 (debit for loss of shareholder continuity).

(1) (2) (3) 2144 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 69 (4) Debit date The debit date is the day the amount is applied.
Deﬁned in this Act: amount, company, consolidated FDP group, dividend, FDP, FDP debit, Inland Revenue Acts, pay, shareholder Compare: 2004 No 35 s MG 15(1)(1), (2)(j) OP 68 Consolidated FDPA refund of tax credit (1) (2) (3) Debit A consolidated FDP group has an FDP debit for the amount of a transfer or refund under section LA 6(2)(d) or (e) (Remaining refundable credits: PAYE, RWT, and certain other items) to the extent to which the amount transferred or refunded is a tax credit under subpart LF (Tax credits for FDP credits) relating to a dividend derived by a group company that is part of the group at the time it derives the dividend.
Table reference The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 6 (refund of tax credit).

Debit date The debit date is the day the transfer or refund is made.
Deﬁned in this Act: company, consolidated FDP group, tax credit, dividend, FDP debit Compare: 2004 No 35 s MG 15(1)(e), (2)(d) Section OP 68(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 466(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section OP 68(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 466(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 69 Consolidated FDPA transfer to imputation credit account (1) Debit A consolidated FDP group has an FDP debit for a tax year for an amount equal to a closing credit balance transferred under section FM 29 (Treatment of credit balance in consolidated group’s FDP account) to the group’s imputation credit account.
2145 Part O s OP 70 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) Table reference The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 7 (transfer to imputation credit account).

Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, consolidated FDP group, FDP debit, imputation credit account, tax year Compare: 2004 No 35 s MG 15(1)(c), (2)(c) OP 70 Consolidated FDPA transfer to group’s CTR account (1) (2) (3) Debit A consolidated FDP group has an FDP debit for a tax year for an amount equal to a CTR credit under section OP 85 for the transfer of a credit balance to the group’s CTR account.
Table references The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 8 (transfer to group’s CTR account).

The CTR credit in subsection (1) is referred to in table O23: CTR credits of consolidated groups, row 6 (transfer from group’s FDP account).

Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, CTR account, CTR credit, consolidated FDP group, FDP debit, tax year Compare: 2004 No 35 s MI 20(1) OP 71 Consolidated FDPA group company’s debit Debit A consolidated FDP group has an FDP debit for an amount to the extent to which it would, in the absence of subsection (2), give rise to— (a) an FDP debit described in a row of table O4: FDP debits, in the FDP account of a group company; and an FDP debit that would create or increase a debit bal- ance in the group company’s FDP account.
(b) (1) 2146 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 72 (2) (3) (4) Table reference The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 9 (group com- pany’s debit).

No debit for group company The amount referred to in subsection (1) does not give rise to an FDP debit in the group company’s account although other- wise eligible to be one.
Debit date The debit date is the day that would be the debit date for the amount in the absence of subsection (3).
Deﬁned in this Act: amount, company, consolidated FDP group, FDP account, FDP debit Compare: 2004 No 35 ss MG 15(1)(k), (2)(i), MG 16(5) OP 72 Consolidated FDPA breach of FDP ratio (1) (2) (3) Debit A consolidated FDP group has an FDP debit for a tax year for the amount of a debit that would arise under section OC 22 (FDPA breach of FDP ratio) in the FDP account of a group company in the absence of section OP 54(3).
Table references The group’s FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 10 (breach of FDP ratio).

The group company’s FDP debit in subsection (1) is referred to in table O4: FDP debits, row 11 (breach of FDP ratio).

Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, company, consolidated FDP group, FDP account, FDP debit, tax year Compare: 2004 No 35 s MG 15(1)(f), (2)(e) 2147 Part O s OP 73 Income Tax Act 2007 Reprinted as at 1 January 2010 OP 73 Consolidated FDPA debit for loss of shareholder continuity (1) (2) (3) Debit A consolidated FDP group has an FDP debit for the amount of an FDP credit retained in the group’s FDP account and unused at the time at which shareholder continuity is lost.
Table reference The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 11 (debit for loss of shareholder continuity).

When debit arises The debit arises at the time shareholder continuity is lost.
Deﬁned in this Act: amount, consolidated FDP group, FDP account, FDP credit, FDP debit, shareholder Compare: 2004 No 35 s MG 15(1)(i), (2)(g) Section OP 73(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 97(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section OP 73(3) heading: substituted (with effect on 1 April 2008), on 7 De- cember 2009, by section 97(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section OP 73(3): substituted (with effect on 1 April 2008), on 7 December 2009, by section 97(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
OP 74 Consolidated FDPA transfer to policyholder credit account Debit A consolidated FDP group has an FDP debit for the amount equal to a credit balance transferred under section FM 30(3) and (4) (Application of certain provisions to consolidated groups) to the group’s policyholder credit account.

Table reference The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 12 (transfer to policyholder credit account).
(1) (2) 2148 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 76 (3) Debit date The debit date is the day of election under section FM 30(2).
Deﬁned in this Act: amount, consolidated FDP group, FDP account, FDP debit, policyholder credit account Compare: 2004 No 35 s MG 15(1)(b), (2)(b) OP 75 Consolidated FDPA breach of FDP ratio by PCA company (1) (2) (3) Debit A consolidated FDP group has an FDP debit for a tax year for the amount of a debit that would arise under section OC 23 (FDPA breach of FDP ratio by PCA company) in the FDP account of a group company in the absence of section OP 54(4)(d).
Table references The group’s FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 13 (breach of FDP ratio by PCA company).

The group company’s FDP debit in subsection (1) is referred to in table O4: FDP debits, row 12 (breach of FDP ratio by PCA company).

Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, company, consolidated FDP group, FDP account, FDP debit, tax year Compare: 2004 No 35 s MG 15(1)(g), (2)(e) OP 76 Consolidated FDPA tax advantage arrangement (1) (2) Debit A consolidated FDP group has an FDP debit for the amount of a debit for a tax advantage arrangement determined under sections GB 35 and GB 36 (which relate to imputation arrange- ments to obtain a tax advantage).
Table reference The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 14 (tax advantage arrangement).

2149 Part O s OP 77 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) Debit date The debit date is the last day of the tax year in which the ar- rangement began.
Deﬁned in this Act: amount, arrangement, consolidated FDP group, FDP ac- count, FDP debit, tax advantage, tax year Compare: 2004 No 35 s MG 15(1)(h), (2)(f) OP 77 Consolidated FDPA ﬁnal balance (1) (2) (3) Debit A consolidated FDP group has an FDP debit for a credit bal- ance in the FDP account when the group stops being a con- solidated FDP group.

Table reference The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 15 (ﬁnal bal- ance).
Debit date The debit date is the day the group stops being a consolidated FDP group.
Deﬁned in this Act: consolidated FDP group, FDP account, FDP debit Compare: 2004 No 35 s MG 15(1)(j), (2)(h) Table O21 : credits of consolidated FDP groups Row FDP credit Credit date Further deﬁned section OA 7 Opening credit balance 1 April [Repealed] [Repealed] FDP credit attached to dividend derived day on which dividend is paid section OP 58 1 2 3 4 2150 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 77 Credit of group company set out in section OP 59 section OP 59 FDP credit attached to dividend and shown in credit transfer notice day on which notice is given section OP 60 [Repealed] [Repealed] Reversal of debit for tax advantage arrangement debit date for debit section OP 63 Table O21 row 2: repealed (with effect on 30 June 2009), on 6 October 2009, by section 468(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O21 row 3: repealed (with effect on 30 June 2009), on 6 October 2009, by section 468(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Table O21 row 7: repealed (with effect on 30 June 2009), on 6 October 2009, by section 468(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O21 row 8: repealed (with effect on 30 June 2009), on 6 October 2009, by section 468(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O22 : FDP debits of consolidated FDP groups Row FDP debit Debit date Further deﬁned section OA 7 section OP 64 opening debit balance 1 April FDP credit attached to dividend paid by group company day on which dividend is paid 1 2 3 FDP credit attached to dividend and show to credit transfer notice day on which dividend is paid section OP 65 2151 Part O s OP 77 Income Tax Act 2007 Reprinted as at 1 January 2010 Refund of FDP day of refund Overpaid FDP applied to satisfy amount other than FDP due under Inland Revenue Acts day of application Refund of tax credit day of refund 31 March Transfer of year-end credit balance to imputation credit account [Repealed] Debit that would increase debit balance for group company set out in section OP 71 10 Debit for breach of FDP 31 March ratio section OP 66 section OP 67 section OP 68 section OP 69 section OP 71 section OP 72 11 Debit for loss of shareholder continuity time of loss of continuity section OP 73 12 Transfer of credit balance to group’s policyholder credit account day of election section OP 74 13 Branch of FDP ratio by group company that is PCA company 31 March section OP 75 2152 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 78 14 Debit for tax advantage arrangement 15 Credit balance when group stops being consolidated FDP group section OP 76 section OP 77 last day of tax year in which arrangement begun days on which group stops being consolidated FDP group Table O22 row 8: repealed (with effect on 30 June 2009), on 6 October 2009, by section 469(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O22 row 11: amended (with effect on 1 April 2008), on 7 December 2009, by section 98 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Consolidated groups and CTR credits Introductory provisions OP 78 CTR accounts of consolidated groups (1) (2) (3) Consolidated group accounts A consolidated group must maintain a group CTR account for a tax year if a group company is a CTR company at a time during the tax year.
Group company’s status Every company that is part of a consolidated group with a CTR account is a CTR company, despite the absence of an election under section OD 1(1) (General rules for companies with CTR accounts) by a group company.

Relationship with section OZ 17 Section OZ 17 (CTRA reductions) may apply to modify the credits and debits arising under sections OP 81 to OP 96.
Deﬁned in this Act: company, CTR account, CTR company, consolidated group, tax year Compare: 2004 No 35 ss MI 14, MI 16 Section OP 78(1): amended (with effect on 1 April 2008), on 6 October 2009, by section 470(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2153 Part O s OP 79 Income Tax Act 2007 Reprinted as at 1 January 2010 Section OP 78(3) heading: added, on 1 April 2008, by section 517 of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OP 78(3): added, on 1 April 2008, by section 517 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
OP 79 When credits and debits arise only in CTR group accounts Credits only in the group accounts A credit listed in subsection (2) arises only in the CTR account of a consolidated group and not in the CTR account of a group company.

Particular credits The credit referred to in subsection (1) is a credit under section OD 7, described in table O5, row 4.
Debits only in the group accounts A debit listed in subsection (4) arises only in the CTR account of a consolidated group and not in the CTR account of a group company.
Particular debits The debit referred to in subsection (3) is a debit under the fol- lowing sections and described in the following rows of table O6: CTR debits (a) section OD 10 (CTRA payment of dividend), row 2 (payment of dividend): section OD 13 (CTRA adjustment for conduit tax re- lief), row 5 (adjustment for conduit tax relief): section OD 17 (CTRA breach of CTR ratio), row 9 (breach of CTR ratio).
(b) (c) Deﬁned in this Act: company, CTR account, CTR credit, CTR debit, CTR ratio, consolidated group Compare: 2004 No 35 s MI 19(1), (2) Section OP 79(2): substituted (with effect on 30 June 2009), on 6 October 2009, by section 471(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(1) (2) (3) (4) 2154 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 82 OP 80 Provisions applying to consolidated groups with CTR accounts (1) (2) (3) Single company, tax liabilities The provisions set out in subsection (2) apply, modiﬁed as necessary, to a consolidated group and to the CTR account of the group as if— (a) (b) the group were a single company; and a reference to a section of this Act were to an equivalent provision applicable to a consolidated group; and a reference to a company’s liability for further FDP, late payment penalty, or FDP penalty tax were a reference to a joint and several liability owed by group companies when the tax or penalty becomes payable.
(c) Other provisions The provisions are— (a) sections OD 22 and OD 23 (which relate to credits attached to dividends and FDP payable); and sections 103, 104, 139B, 140C, 140D, and 181 of the Tax Administration Act 1994.

(b) Consolidation provisions Sections FM 4 and FM 5 (which relate to the liability of con- solidated groups) override subsection (1)(c).
Deﬁned in this Act: company, CTR account, consolidated group, FDP penalty tax, further FDP Compare: 2004 No 35 s MI 22(1) CTR credits of consolidated groups OP 81 Consolidated CTRA tax credit for conduit tax relief [Repealed] Section OP 81: repealed (with effect on 30 June 2009), on 6 October 2009, by section 472(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 82 Consolidated CTRA reduction of FDP [Repealed] Section OP 82: repealed (with effect on 30 June 2009), on 6 October 2009, by section 473(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2155 Part O s OP 83 Income Tax Act 2007 Reprinted as at 1 January 2010 OP 83 Consolidated CTRA dividend derived with CTR credit (1) (2) (3) Credit A consolidated group has a CTR credit for the amount of a CTR credit attached to a dividend derived by a group company that is part of the group when the dividend is derived.

Table reference The CTR credit in subsection (1) is referred to in table O23: CTR credits of consolidated groups, row 4 (dividend derived with CTR credit).
Credit date The credit date is the day the dividend is paid.
Deﬁned in this Act: amount, company, CTR credit, consolidated group, divi- dend, pay Compare: 2004 No 35 s MI 17(1)(c), (2)(c) OP 84 Consolidated CTRA group company’s credit Credit A consolidated group has a CTR credit for the amount of a credit that arises when— (a) a CTR credit described in a row of table O5: CTR credits, arises in the CTR account of a group company; and a CTR debit described in a row of table O24: CTR debits of consolidated groups, arises in the CTR account of the group; and the debit is not offset by a credit arising in the group account before the credit arose in the group company’s account; and the amount of the credit is no more than the amount of the debit.
(b) (c) (d) Table reference The CTR credit in subsection (1) is referred to in table O23: CTR credits of consolidated groups, row 5 (group company’s credit).
Offsetting debits For the purposes of subsection (1)(c), to determine whether a debit has been offset by a credit in the group account,— (1) (2) (3) 2156 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 85 (a) (b) (c) (d) a credit retains its separate character and is not treated as part of a credit under section OA 7 (Opening balances of memorandum accounts); and credits are treated as reducing debits in the order in which the credits arise; and a credit, whether some or all, is counted only once in determining whether the debit has been offset; and credits in the accounts of more than 1 group company become a credit to the group account— (i) (ii) in the order of their credit date; and as chosen by the group, if the credits arise on the same credit date; and on a pro rata basis, if no election is made under subparagraph (ii).
(iii) (4) Credit date The credit date is the day the credit is recorded as transferred to the group account.
Deﬁned in this Act: amount, company, CTR account, CTR credit, CTR debit, consolidated group Compare: 2004 No 35 ss MI 17(1)(e), (2)(e), MI 19(3), (4) OP 85 Consolidated CTRA transfer from group’s FDP account (1) (2) Credit A consolidated group has a CTR credit for a tax year for an amount of a credit balance in the group’s FDP account that is treated as transferred to the group’s CTR account when— (a) a credit balance exists in the group’s FDP account im- mediately before the end of the tax year; and a debit balance exists in the group’s CTR account im- mediately before the end of the tax year.
(b) Finding balances For the purposes of subsection (1),— (a) the debit balance in the CTR account is determined after a CTR credit arises at the end of the tax year under the following sections and described in the following rows of table O23: CTR credits of consolidated groups— (i) section OP 81, row 2 (tax credit for conduit tax relief); and 2157 Part O s OP 86 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) (4) (b) (ii) section OP 84, row 5 (group company’s credit); and the credit balance in the FDP account is determined after an FDP credit arises under section OP 62 before the end of the tax year.
Amount of credit and debit The amount of the credit is equal to the smaller of the 2 bal- ances referred to in subsection (1), and becomes— (a) (b) the CTR credit; and the FDP debit under section OP 70.
Table references The table references are as follows (a) the CTR credit in subsection (1) is referred to in table O23: CTR credits of consolidated groups, row 6 (trans- fer from group’s FDP account): the FDP credit in subsection (2)(b) is referred to in table O21: FDP credits of consolidated FDP groups, row 8 (transfer for net foreign attributed income): the CTR credit in subsection (3)(a) is referred to in table O23: CTR credits of consolidated groups, row 6 (trans- fer from group’s FDP account): the FDP debit in subsection (3)(b) is referred to in table O22: FDP debits of consolidated groups, row 8 (trans- fer to groups CTR account).
(b) (c) (d) (5) Credit date The credit date is the last day of the tax year.
Deﬁned in this Act: amount, company, CTR account, CTR credit, consolidated group, FDP account, FDP credit, FDP debit, tax year Compare: 2004 No 35 ss MI 17(1)(f), (2)(f), MI 20(1) OP 86 Consolidated CTRA reversal of tax advantage arrangement When this section applies This section applies when it is established that a CTR credit in a consolidated group’s CTR account was incorrectly deter- mined to be the subject of an arrangement to obtain a tax ad- vantage.
(1) 2158 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 88 (2) (3) (4) Credit The consolidated group has a CTR credit for an amount equal to a debit in the group’s CTR account under section OP 93.

Table references The CTR credit in subsection (2) is referred to in table O23: CTR credits of consolidated groups, row 7 (reversal of tax advantage arrangement).

The CTR debit in subsection (2) is referred to in table O24: CTR debits of consolidated groups, row 8 (tax advantage arrangement).
Credit date The credit date is the same as the debit date for the debit.

Deﬁned in this Act: amount, CTR account, CTR credit, consolidated group, tax advantage Compare: 2004 No 35 s MI 17(1)(d), (2)(d) CTR debits of consolidated groups OP 87 Consolidated CTRA payment of dividend (1) (2) (3) Debit A consolidated group has a CTR debit for the amount of a CTR credit attached to a dividend paid by a group company that is part of the group when the dividend is paid.
Table reference The CTR debit in subsection (1) is referred to in table O24: CTR debits of consolidated groups, row 2 (payment of divi- dend).

Debit date The debit date is the day the dividend is paid.
Deﬁned in this Act: amount, company, CTR credit, CTR debit, consolidated group, dividend, pay Compare: 2004 No 35 s MI 18(1)(a), (2)(a) OP 88 Consolidated CTRA transfer to group’s FDP account [Repealed] Section OP 88: repealed (with effect on 30 June 2009), on 6 October 2009, by section 474(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2159 Part O s OP 89 Income Tax Act 2007 Reprinted as at 1 January 2010 OP 89 Consolidated CTRA adjustment for conduit tax relief (1) (2) (3) Debit A consolidated group has a CTR debit for a tax year for the amount of an adjustment allowed under section FF 7(8) (Sur- plus to foreign dividends) to a group company that is part of the group on the last day of the income year corresponding to the tax year for which the adjustment is allowed.
Table reference The CTR debit in subsection (1) is referred to in table O24: CTR debits of consolidated groups, row 4 (adjustment for con- duit tax relief).

Debit date The debit date is the day the company ﬁles a return of income for the tax year corresponding to the income year for which the adjustment is made.
Deﬁned in this Act: amount, company, CTR debit, consolidated group, income year, return of income, tax year Compare: 2004 No 35 s MI 18(1)(b), (2)(b) OP 90 Consolidated CTRA group company’s debit Debit A consolidated group has a CTR debit for an amount to the extent to which the amount would, in the absence of section OP 54(3), give rise to— (a) a CTR debit described in a row of table O6: CTR debits, in the CTR account of a group company; and a CTR debit that would create or increase a debit bal- ance in the group company’s CTR account.
(b) Table reference The CTR debit in subsection (1) is referred to in table O24: CTR debits of consolidated groups, row 5 (group company’s debit).

Debit date The debit date is the day that would be the debit date if the debit had arisen in the company’s account.
Deﬁned in this Act: amount, company, CTR account, CTR debit, consolidated group Compare: 2004 No 35 s MI 19(5) (1) (2) (3) 2160 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 91 OP 91 Consolidated CTRA increase in resident shareholding (1) (2) (3) Debit A consolidated group has a CTR debit for the amount of a CTR credit in the group’s CTR account if the resident shareholding requirements of subsection (2) and section OA 8 (Shareholder continuity requirements for memorandum accounts) are not met.
Resident shareholding requirements For the purposes of subsection (1), the resident shareholding requirements are that— (a) the credit continues to exist to the extent to which it is not reduced by a later CTR debit; and since the credit date for the credit, the percentage of the group’s shareholders who are resident in New Zealand does not increase by 34% or more; and an amount that is the CTR debit under subsection (1) arises for the amount of the credit that still exists when the requirement of paragraph (b) is not met.
(b) (c) Supporting rules The following rules apply for the purposes of subsection (2) (a) the percentage of shareholders resident in New Zealand at any time is found by taking the highest of the follow- ing percentages: (i) (ii) (iii) the percentage of direct voting interests held in the group by residents; and the percentage of direct market value interests held in the group, if a direct market value circum- stance exists, by residents; and if not all shares held by the group’s shareholders are shares of the same class, the percentage of total dividends that would be derived by residents if the group were liquidated: (b) (c) a credit retains its separate character and is not treated as part of a credit referred to in section OA 7 (Opening balances of memorandum accounts) in a later tax year; and the amount by which a credit is reduced by an earlier or later debit is found by— 2161 Part O s OP 92 Income Tax Act 2007 Reprinted as at 1 January 2010 (i) (ii) treating debits as reducing credits in the order in which the credits arise; and counting a debit, whether some or all, only once in the reduction of a credit; and the credit date for a credit arising under section OP 84 is the credit date when the credit arose in the CTR account of the group company; and the debit still arises despite an arrangement affecting the company’s shares that has a purpose or effect of defeat- ing the intent and application of the resident sharehold- ing requirements.
(d) (e) Table references The CTR debit in subsection (1) is referred to in table O24: CTR debits of consolidated groups, row 6 (increase in resident shareholding).

The CTR credit in subsection (3)(d) is referred to in table O23: CTR credits of consolidated groups, row 5 (group company’s credits).

Debit date The debit date is the day on which the shareholding threshold is ﬁrst reached or passed.
Deﬁned in this Act: amount, arrangement, company, CTR account, CTR credit, CTR debit, consolidated group, direct market value circumstance, direct market value interest, direct voting interest, dividend, liquidation, resident, resident in New Zealand, share, shareholder, shares of the same class, tax year Compare: 2004 No 35 s MI 18(1)(e), (2)(e), (3), (4) (4) (5) OP 92 Consolidated CTRA breach of CTR ratio Debit A consolidated group has a CTR debit for a tax year for the amount of a debit under section OD 17 (CTRA breach of CTR ratio) that would arise in the CTR account of a group company in the absence of OP 79.
Table references The group’s CTR debit in subsection (1) is referred to in table O24: CTR debits of consolidated groups, row 7 (breach of CTR ratio).

The group company’s CTR credit in subsection (1) is referred to in table O6: CTR debits, row 9 (breach of CTR ratio).

(1) (2) 2162 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 94 (3) Debit date The debit date is the last day of the tax year.
Deﬁned in this Act: amount, company, CTR account, CTR debit, consolidated group, tax year Compare: 2004 No 35 s MI 18(1)(c), (2)(c) OP 93 Consolidated CTRA tax advantage arrangement (1) (2) (3) Debit A consolidated group has a CTR debit for the amount of a debit for a tax advantage arrangement determined under sections GB 35 and GB 36 (which relate to imputation arrangements to obtain a tax advantage) which apply to a CTR credit as if it were an FDP credit.
Table reference The CTR debit in subsection (1) is referred to in table O24: CTR debits of consolidated groups, row 8 (tax advantage ar- rangement).

Debit date The debit date is the last day of the tax year in which the ar- rangement began.
Deﬁned in this Act: amount, arrangement, CTR debit, consolidated group, tax advantage, tax year Compare: 2004 No 35 s MI 18(1)(d), (2)(d) OP 94 Consolidated CTRA ﬁnal balance (1) (2) (3) Debit A consolidated group has a CTR debit for a credit balance in the CTR account when the group is no longer required to maintain the account.

Table reference The CTR debit in subsection (1) is referred to in table O24: CTR debits of consolidated groups, row 9 (ﬁnal balance).
Debit date The debit date is the day before the group is no longer required to maintain a CTR account.
Deﬁned in this Act: consolidated group, CTR account, CTR debit Compare: 2004 No 35 s MI 18(1)(f), (2)(f) 2163 Part O s OP 95 Income Tax Act 2007 Reprinted as at 1 January 2010 Consolidated groups’ FDP payments and refunds OP 95 FDP payable for credits and debits in group’s CTR account [Repealed] Section OP 95: repealed (with effect on 30 June 2009), on 6 October 2009, by section 475(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 96 Refund on transfer from group’s FDP account (1) (2) (3) Refund A consolidated FDP group is entitled to a refund for the amount referred to in section OP 85 for a transfer from the group’s CTR account.

Table reference The amount in subsection (1) is referred to in table O23: CTR credits of consolidated groups, row 6 (transfer from group’s FDP account).

Application of refund The Commissioner may apply the amount of the refund to pay an amount due under the Inland Revenue Acts.
Deﬁned in this Act: amount, Commissioner, CTR account, consolidated FDP group Compare: 2004 No 35 s MI 22(4) Table O23 : conduit tax relief credits of consolidated groups Further deﬁned section OA 7 Row Conduit tax relief Credit date credit Opening credit balance 1 April [Repealed] [Repealed] 1 2 3 2164 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 96 4 5 6 7 CTR credit attached to dividend derived Credit from group company’s CTR account day on which dividend is paid section OP 83 set out section OP 84 section OP 84 Transfer from group’s FDP account 31 March section OP 85 Reversal of debt to tax advantage arangement debit date for debit section OP 86 Table O23 row 2: repealed (with effect on 30 June 2009), on 6 October 2009, by section 476(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O23 row 3: repealed (with effect on 30 June 2009), on 6 October 2009, by section 476(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O24 : conduit tax relief debits of consolidated groups Row Conduit tax relief Debit date debit 1 2 3 4 opening debit balance 1 April CTR credit atttached to dividend paid by group company day on which dividend is paid [Repealed] Adjustment for conduit relief day on which return of income with adjustment is ﬁled Further deﬁned section OA 7 section OP 87 section OP 89 2165 Part O s OP 97 Income Tax Act 2007 Reprinted as at 1 January 2010 Debit that would increase debit balance for group company company’s debit date section OP 90 Increase in resident shareholding by more than 34% day of shareholding change Debit for breach of CTR ratio 31 March Debit for tax advantage arrangement last day of tax year in which arrangement began section OP 91 section OP 92 section OP 93 Credit balance when group is no longer required to maintain CTR account day on which account stops section OP 94 Table O24 row 3: repealed (with effect on 30 June 2009), on 6 October 2009, by section 477(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Consolidated groups and branch equivalent tax accounts Introductory provisions OP 97 Branch equivalent tax accounts of consolidated BETA groups Consolidated group accounts A consolidated group is a consolidated branch equivalent tax account (BETA) group for a tax year if— (a) a group company is a BETA company at a time during the tax year; or the group chooses to maintain a branch equivalent tax account.
(b) (1) 2166 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 99 (2) Notifying Commissioner The nominated company of a consolidated BETA group must notify the Commissioner of an election under subsection (1)(b)— (a) (b) Deﬁned in this Act: BETA company, branch equivalent tax account, Commis- sioner, consolidated BETA group, consolidated group, nominated company, no- tify, tax year Compare: 2004 No 35 s MF 7(1), (2) no later than 21 days after the day of election; or by a later date if the Commissioner allows.
OP 98 Choosing to stop being consolidated BETA group (1) (2) (3) Election The nominated company of a consolidated BETA group may choose that the group’s status as a consolidated BETA group is to end.

No election An election under subsection (1) may be made during a tax year that is later than the tax year in which the group chooses under section OP 97 to become a consolidated BETA group.
When group ends status The election takes effect from the ﬁrst day of the tax year after the tax year in which the election referred to in subsection (2) is made, but only if— (a) the group ﬁles an annual ICA return for the year of election in the time allowed by section 69 of the Tax Administration Act 1994; and no group company is a BETA company in the tax year after the year of the election.
(b) Deﬁned in this Act: annual ICA return, BETA company, company, consolidated BETA group, nominated company, tax year Compare: 2004 No 35 s MF 7(3), (4) OP 99 When credits and debits arise only in branch equivalent tax group accounts [Repealed] Section OP 99: repealed (with effect on 30 June 2009), on 6 October 2009, by section 478(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2167 Part O s OP 100 Income Tax Act 2007 Reprinted as at 1 January 2010 Section OP 99(5) heading: added, on 1 April 2008, by section 518 of the Taxa- tion (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OP 99(5): added, on 1 April 2008, by section 518 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).
Branch equivalent tax credits of consolidated BETA groups OP 100 Consolidated BETA payment of income tax on foreign income Credit A consolidated BETA group has a branch equivalent tax credit for an income year for an amount calculated using the for- mula— ((group CFC income – group deductions) × tax rate) – foreign tax – debit balances.
Deﬁnition of items in formula In the formula,— (a) (b) (c) (d) group CFC income is the amount of attributed foreign income derived by the consolidated BETA group during the income year: group deductions is the total amount for the group for the income year of— (i) attributed controlled foreign company (CFC) loss; and attributed CFC net loss; and foreign investment fund (FIF) loss; and FIF net loss: (ii) (iii) (iv) tax rate is the basic rate of income tax set out in— (i) schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) if the company is not a Maori authority; or schedule 1, part A, clause 7 if the company is a Maori authority: (ii) foreign tax is the amount of foreign tax credits allowed under sections LK 1 to LK 7 (which relate to tax credits relating to attributed CFC income), as applicable, relat- ing to the group’s income tax liability for the income year: (1) (2) 2168 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 101 (3) (4) (e) debit balances is the amount of all debit balances in a branch equivalent tax account applied to satisfy the group’s income tax liability for the income year.
Table reference The branch equivalent tax credit in subsection (1) is referred to in table O25: branch equivalent tax credits of consolidated BETA groups, row 2 (payment of income tax on foreign in- come).

Credit date The credit date is the day the nominated company ﬁles the return of income for the tax year corresponding to the income year for which the calculation is made.
Deﬁned in this Act: amount, attributed CFC loss, attributed CFC net loss, attributed foreign income, basic rate, branch equivalent tax account, branch equivalent tax credit, consolidated BETA group, FDP, FIF loss, FIF net loss, foreign tax, income tax, income tax liability, income year, Maori authority, nominated company, return of income, tax year Compare: 2004 No 35 s MF 8(2)(a), (3)(a) Section OP 100(2)(c)(i): amended, on 1 April 2008, by section 562 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OP 101 Consolidated BETA payment of income tax (1) When this section applies This section applies when a consolidated BETA group has a debit balance in its branch equivalent tax account or in the branch equivalent tax account of a group company arising as follows: (a) the income of the group for an income year includes attributed CFC income that is derived by— (i) (ii) the group; or a company (group company B) that would be part of the same group of companies as the group if the group were a single company; and an amount of FDP that gives rise to a debit included in the debit balance has been paid— (i) (ii) (iii) directly; or by reducing a tax loss; or to reduce an FDP liability under section RG 7 (Reduction of payments for conduit tax relief).
(b) 2169 Part O s OP 101 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Election The nominated company of the consolidated BETA group may choose to apply some or all of the debit balance to satisfy an income tax liability of the group or of group company B for a tax year that corresponds to the income year referred to in subsection (1).
Maximum amount (2B) Despite subsection (2) and section OE 7(3) (BETA payment of income tax), the amount that may be applied to satisfy the in- come tax liability must be no more than the amount calculated under section OE 6(1) for the company that has the attributed CFC income or under section OP 100(1) for the consolidated group, in both cases treating the item debit balances as zero.
Credit The amount that is applied to satisfy the income tax liability referred to in subsection (2) is a branch equivalent tax credit in the branch equivalent tax account of the group or group company B, as applicable.

Table reference The branch equivalent tax credit in subsection (3) is referred to in table O25: branch equivalent tax credits of consolidated BETA groups, row 3 (payment of income tax).
Income tax paid For the purposes of this section, the income tax liability— (a) is calculated by applying the formula in section OP 100 on the basis that the item debit balances is zero; and is satisﬁed to the extent to which the liability is no more than the income tax payable in relation to the amount of attributed CFC income.
(b) Who makes the election The consolidated BETA group makes the election referred to in subsection (2) as follows: (a) if the group’s income tax liability is to be satisﬁed, the election may be made by— (i) (ii) the nominated company; or another group company; or (3) (4) (5) (6) 2170 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 102 (7) (8) (iii) a company that would be part of the same group of companies as the group if the group were a single company; and if group company B’s income tax liability is to be satis- ﬁed, the election must be made by the nominated com- pany.
(b) How election made An election is made under subsection (6) by recording the credit in the branch equivalent tax account of the group or group company B, as applicable.

Credit date The credit date is the day of election.
Deﬁned in this Act: amount, attributed CFC income, branch equivalent tax ac- count, branch equivalent tax credit, company, consolidated BETA group, divi- dend, FDP, group of companies, income, income tax, income tax liability, in- come year, Maori authority, nominated company, pay, tax loss, tax year Compare: 2004 No 35 ss MF 8(2)(c), (3)(b), MF 10(3), MF 10(4)–(6) Section OP 101(2B) heading: inserted, on 1 April 2008, by section 519(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OP 101(2B): inserted, on 1 April 2008, by section 519(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OP 101(3): amended, on 1 April 2008, by section 519(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section OP 101 compare note: amended, on 1 April 2008, by section 519(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OP 102 Consolidated BETA remaining debit balances (1) When this section applies This section applies for the purposes of section OP 101 when an income tax liability of a consolidated BETA group or group company is satisﬁed by applying some of a debit balance in the group’s branch equivalent tax account, or in the account of another company in the same consolidated BETA group, and an unused portion of the debit balance remains after the income tax liability is satisﬁed.
(2) Conversion to tax loss The unused amount is converted into a tax loss component for the purposes of sections IA 2 to IA 10 (which relate to the 2171 Part O s OP 103 Income Tax Act 2007 Reprinted as at 1 January 2010 treatment of tax losses).
The amount of the tax loss component is calculated using the formula— (3) (4) Deﬁnition of items in formula In the formula,— (a) (b) balance is the amount of the debit balance remaining in the branch equivalent tax account: tax rate is the basic rate of income tax set out in— (i) schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts) if the company is not a Maori authority; or schedule 1, part A, clause 7 if the company is a Maori authority.
(ii) Group’s tax loss The tax loss belongs to the consolidated group.
Deﬁned in this Act: amount, attributed CFC income, basic rate, branch equiva- lent tax account, branch equivalent tax credit, company, consolidated BETA group, dividend, income tax, income tax liability, Maori authority, tax loss com- ponent Compare: 2004 No 35 ss MF 8(2)(c), (3)(b), MF 10(4)–(6) Section OP 102(3)(b)(i): amended, on 1 April 2008, by section 562 of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OP 103 Consolidated BETA refund of FDP Credit A consolidated BETA group has a branch equivalent tax credit for a tax year for the amount of a refund of FDP.

Subsections (2) and (3) override this subsection.

Refund giving rise to debit A refund under subsection (1) must be a refund of a payment of FDP that gave rise to a debit under section OP 105.
Reduction The amount of the credit under subsection (1) is reduced to the extent to which— (1) (2) (3) 2172 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 104 (a) (b) the payment of FDP is made before a branch equivalent tax credit arises under section OP 104 in the group’s branch equivalent tax account; and the amount of the refund is no more than the amount of the credit for the loss of shareholder continuity.
(4) Table references The table references are as follows: (a) (b) (c) the branch equivalent tax credit in subsection (1) is re- ferred to in table O25: branch equivalent tax credits of consolidated BETA groups, row 4 (refund of FDP): the branch equivalent tax debit in subsection (2) is re- ferred to in table O26: branch equivalent tax debits of consolidated BETA groups, row 2 (payment of FDP): the branch equivalent tax credit in subsection (3)(a) is referred to in table O25: branch equivalent tax credits of consolidated BETA groups, row 5 (credit for loss of shareholder continuity).
(5) Credit date The credit date is the day the refund is made.
Deﬁned in this Act: amount, branch equivalent tax account, branch equiva- lent tax credit, consolidated BETA group, consolidated group, FDP, pay, share- holder, tax year Compare: 2004 No 35 s MF 8(2)(d), (3)(c) OP 104 Consolidated BETA credit for loss of shareholder continuity (1) (2) Credit A consolidated BETA group has a branch equivalent tax credit for the amount of a branch equivalent tax debit retained in the branch equivalent tax account and unused at the time at which shareholder continuity is lost.
Table reference The branch equivalent tax credit in subsection (1) is referred to in table O25: branch equivalent tax credits of consolidated BETA groups, row 5 (credit for loss of shareholder continuity).

2173 Part O s OP 105 Income Tax Act 2007 Reprinted as at 1 January 2010 (3) When credit arises The credit arises at the time shareholder continuity is lost.
Deﬁned in this Act: amount, branch equivalent tax account, branch equivalent tax credit, branch equivalent tax debit, consolidated BETA group, shareholder Compare: 2004 No 35 s MF 8(2)(e), (3)(d) Section OP 104(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 99(1) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Section OP 104(3) heading: substituted (with effect on 1 April 2008), on 7 De- cember 2009, by section 99(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section OP 104(3): substituted (with effect on 1 April 2008), on 7 December 2009, by section 99(2) of the Taxation (Consequential Rate Alignment and Re- medial Matters) Act 2009 (2009 No 63).
Branch equivalent tax debits of consolidated BETA groups [Repealed] Heading: repealed (with effect on 30 June 2009), on 6 October 2009, by section 479(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OP 105 Consolidated BETA payment of FDP [Repealed] Section OP 105: repealed (with effect on 30 June 2009), on 6 October 2009, by section 479(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 106 Consolidated BETA reduction of FDP [Repealed] Section OP 106: repealed (with effect on 30 June 2009), on 6 October 2009, by section 479(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

OP 107 Consolidated BETA refund of income tax [Repealed] Section OP 107: repealed (with effect on 30 June 2009), on 6 October 2009, by section 479(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
2174 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 108B OP 108 Consolidated BETA debit for loss of shareholder continuity [Repealed] Section OP 108: repealed (with effect on 30 June 2009), on 6 October 2009, by section 479(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Debit if credit balance at beginning of ﬁrst affected income year Heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 480(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OP 108B Consolidated BETA group with credit balance at beginning of ﬁrst affected income year If a consolidated BETA group has a credit balance in its branch equivalent tax account at the beginning of the ﬁrst income year for which this section applies to the group, a branch equivalent tax debit of an amount equal to the credit balance arises in the branch equivalent tax account at that time.
Deﬁned in this Act: branch equivalent tax account, branch equivalent tax debit, consolidated BETA group, income year OP 108B: inserted (with effect on 30 June 2009), on 6 October 2009, by section 480(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O25 : branch equivalent tax credits of consolidated BETA groups Row Branch equivalent tax Credit date credit Opening credit balance 1 April Further deﬁned section OA 7 [Repealed] Debit balance applied to satisfy income tax liabilit day of election section OP 101 2175 1 2 3 Reprinted as at 1 January 2010 section OP 103 Part O s OP 109 Income Tax Act 2007 Refund of FDP day of refund 4 5 Credit for loss of shareholder continuity time of loss of continuity section OP 104 Table O25 row 2: repealed (with effect on 30 June 2009), on 6 October 2009, by section 481(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Table O25 row 5: amended (with effect on 1 April 2008), on 7 December 2009, by section 100 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Table O26 : branch equivalent tax debits of consolidated BETA groups [Repealed] Table O26: repealed (with effect on 30 June 2009), on 6 October 2009, by section 482(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
Consolidated groups and policyholder credit accounts Introductory provision OP 109 Policyholder credit accounts of consolidated groups A consolidated group has a policyholder credit account if a group company is a policyholder credit account (PCA) com- pany.
Deﬁned in this Act: company, consolidated group, PCA company, policyholder credit account Compare: 2004 No 35 s ME 25 Policyholder credits of consolidated groups OP 110 Consolidated PCA transfer from imputation credit account (1) Credit A consolidated group has a policyholder credit for an amount equal to an imputation debit under section OP 44.
2176 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 112 (2) (3) Table references The policyholder credit in subsection (1) is referred to in table O27: policyholder credits of consolidated groups, row 2 (transfer from imputation credit account).

The imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 18 (transfer to policyholder credit account).
Credit date The credit date is the same as the debit date recorded for the transfer in the imputation credit account.

Deﬁned in this Act: amount, consolidated group, imputation credit account, imputation debit, policyholder credit Compare: 2004 No 35 s ME 26(2)(a), (3)(a) OP 111 Consolidated PCA transfer from FDP account (1) (2) (3) Credit A consolidated group has a policyholder credit for an amount equal to the amount of an FDP debit under section OP 74.
Table references The policyholder credit in subsection (1) is referred to in table O27: policyholder credits of consolidated groups, row 3 (transfer from FDP account).

The FDP debit in subsection (1) is referred to in table O22: FDP debits of consolidated FDP groups, row 12 (transfer to policyholder credit account).

Credit date The credit date is the day of election referred to in section OP 74.
Deﬁned in this Act: amount, consolidated group, FDP debit, policyholder credit Compare: 2004 No 35 s ME 26(2)(b), (3)(b) OP 112 Consolidated PCA group company’s credit (1) Credit A consolidated group has a policyholder credit for the amount of a credit arising as follows: (a) a policyholder credit described in a row of table O13: policyholder credits, arises in the policyholder credit account of a group company; and 2177 Part O s OP 113 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (b) (c) a policyholder debit described in a row of table O28: policyholder debits of consolidated groups, arises in the policyholder credit account of the group; and the debit is not offset by a credit arising in the group account before or on the same date on which the credit arose in the group company’s account.
Table reference The policyholder credit in subsection (1) is referred to in table O27: policyholder credits of consolidated groups, row 4 (group company’s credit).
(b) (c) Offsetting debits For the purposes of subsection (1)(c), to determine whether a debit has been offset by a credit in the group account— (a) credits are treated as reducing debits in the order in which the credits arise; and a credit, whether some or all, is counted only once in determining whether the debit has been offset; and credits in the accounts of more than 1 group company become a credit to the group account— (i) (ii) in the order of their credit date; and as chosen by the group, if the credits arise on the same credit date; and on a pro rata basis, if no election is made under subparagraph (ii).
(iii) (4) Credit date The credit date is the day the debit is recorded in the group account.
Deﬁned in this Act: amount, company, consolidated group, policyholder credit, policyholder credit account, policyholder debit Compare: 2004 No 35 ss ME 26(2)(c), (3)(c), ME 27(1), (3) OP 113 Consolidated PCA maximum deﬁcit debit in FDP account Credit A consolidated group has a policyholder credit for a tax year for an amount equal to the amount of the FDP debit— (a) that arises during the tax year in the group’s FDP ac- count under section OP 75; and (1) 2178 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 114 (2) (3) (b) whose amount is calculated under sections OC 23 and OC 36 (which relate to the maximum deﬁcit debit).
Table references The policyholder credit in subsection (1) is referred to in table O27: policyholder credits of consolidated groups, row 5 (credit for FDP account maximum deﬁcit).

The FDP debit in subsection (1)(a) is referred to in table O22: FDP debits of consolidated FDP groups, row 13 (breach of FDP ratio by PCA company).

Credit date The credit date is the last day of the tax year.
Deﬁned in this Act: amount, consolidated group, FDP account, FDP debit, pol- icyholder credit, tax year Compare: 2004 No 35 s ME 26(2)(d), (3)(d) OP 114 Consolidated PCA reduced deﬁcit debit in FDP account (1) (2) (3) Credit A consolidated group has a policyholder credit for a tax year for an amount equal to the amount of the FDP debit— (a) that arises during the tax year in the group’s FDP ac- count under section OP 75; and whose amount is calculated under sections OC 23 and OC 38 (which relate to the reduced deﬁcit debit).
(b) Table references The policyholder credit in subsection (1) is referred to in table O27: policyholder credits of consolidated groups, row 6 (credit for FDP account reduced deﬁcit).

The FDP debit in subsection (1)(a) is referred to in table O22: FDP debits of consolidated FDP groups, row 13 (breach of FDP ratio by PCA company).

Credit date The credit date is the last day of the tax year.
Deﬁned in this Act: amount, consolidated group, FDP account, FDP debit, pol- icyholder credit, tax year Compare: 2004 No 35 s ME 26(2)(e), (3)(d) 2179 Part O s OP 115 Income Tax Act 2007 Reprinted as at 1 January 2010 Policyholder debits of consolidated groups OP 115 Consolidated PCA payment of tax relating to policyholder base (1) (2) (3) (4) (5) Election The nominated company of a consolidated group may choose for a tax year to apply some or all of a credit balance in the group’s policyholder credit account to satisfy— (a) (b) a policyholder base income tax liability of the group; or a provisional tax liability of the group for its policy- holder base.
Manner of election The company makes an election under subsection (1) by recording as a debit in the group account the amount of the credit balance applied to satisfy the policyholder base income tax liability.

Effect of election As a result of the election— (a) a policyholder debit arises in the policyholder credit ac- count; and the group’s liability for the income tax or provisional tax is satisﬁed.
(b) Table reference The policyholder debit in subsection (3)(a) is referred to in table O28: policy-holder debits of consolidated groups, row 2 (payment of tax relating to policyholder base).

Debit date The debit date is the last day of the income year corresponding to the tax year.
Deﬁned in this Act: amount, consolidated group, income tax, income year, nominated company, policyholder base, policyholder base income tax liabil- ity, policyholder credit account, policyholder debit, provisional tax, tax year Compare: 2004 No 35 ss ME 26(4)(a), (5)(a), ME 28(1), (2) OP 116 Consolidated PCA transfer to imputation credit account Election The nominated company of a consolidated group may choose for a tax year to transfer some or all of a credit balance in the (1) 2180 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 116 group’s policyholder credit account to the imputation credit account of— (a) the consolidated imputation group that the company is part of; or the imputation group that includes the companies in the consolidated group.
(b) (2) (3) (4) Exclusion Despite subsection (1), the election must exclude an amount of the credit balance that arises in the following circumstances: the group has adopted a non-standard accounting year; (a) and during the accounting year that includes the last day of the tax year, an election has been made that means the credit balance includes a credit under the following sections and described in the following rows of table O27: policyholder credits of consolidated groups: (i) (b) section OP 110, row 2 (transfer from imputation credit account): section OP 111, row 3 (transfer from FDP ac- count); and (ii) (c) an election under this section would result in a debit to the policyholder credit account during the tax year.
Debit and credit The amount of the credit balance transferred under subsection (1) is— (a) (b) a debit in the group’s policyholder credit account; and a credit under section OP 21 in the imputation credit account of the relevant group.

Table references The policyholder debit in subsection (3)(a) is referred to in table O28: policyholder debits of consolidated groups, row 3 (transfer to imputation credit account).
The imputation credit imputation in subsection (3)(b) is referred to in table O19: credits of consolidated imputation groups, row 16 (transfer from group’s policyholder credit account).

(5) Credit balance reduced Despite subsection (2)(b), the credit balance includes a credit that is cancelled by a later debit to the account.
2181 Part O s OP 116 Income Tax Act 2007 Reprinted as at 1 January 2010 Cancellation (6) Whether a debit cancels a credit for the purposes of subsection (3) is found by treating debits as offsetting credits in the order in which the credits arise in the account.
(7) (8) Manner of election The company makes the election by recording the amount of the credit balance transferred as— (a) (b) a debit in the group’s policyholder credit account; and a credit in the imputation credit account of— the consolidated imputation group; or (i) the imputation group.

(ii) Debit date The debit date is the day of election.
Deﬁned in this Act: accounting year, amount, company, consolidated group, consolidated imputation group, imputation credit account, imputation group, nominated company, non-standard accounting year, PCA company, policy- holder credit, policyholder credit account, policyholder debit, tax year Compare: 2004 No 35 ss ME 26(4)(b), (5)(b), ME 28(3), (4) Table O27: policyholder credits of consolidated groups Row Polictyholder credit Credit date 1 2 3 Opening credit balance 1 April Transfer of credit balance from imputation credit account Transfer of credit balance from FDP account debit date in imputation credit account for transfer day of election under section OP 74 Further deﬁned section OA 7 section OP 110 section OP 111 2182 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OP 116 4 5 6 Credit transferred from group company’s policyholder credit account Debit of FDP account maximum deﬁcit that arises during tax year Transfer of credit balance from FDP account for reduced deﬁcit debit that arises during tax year debit date in group company’s account for transfer 31 March 31 March section OP 112 section OP 113 section OP 114 Table O28: policyholder debits of consolidated groups Row Policyholder debit Debit date 1 2 3 Further deﬁned section OA 7 Opening debit balance 1 April Credit balance applied to satisfy policyholder base income tax or provisional tax liability for income year Credit balance transferred to imputation credit account last day of income year section OP 115 day of election section OP 116
 2183 Part O s OZ 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Subpart OZ—Terminating provisions OZ 1 No imputation credit for pre-imputation tax paid No imputation credit arises in the imputation credit account of an imputation credit account (ICA) company for a payment of income tax imposed for a pre-imputation income year.
Deﬁned in this Act: ICA company, imputation credit, imputation credit account, income tax, pay, pre-imputation income year Compare: 2004 No 35 s ME 4(1)(a)(viii) OZ 2 No imputation debit for pre-imputation refund No imputation debit arises in the imputation credit account of an ICA company for a refund of income tax for a pre-imput- ation income year.
Deﬁned in this Act: ICA company, imputation credit account, imputation debit, income tax, pre-imputation income year Compare: 2004 No 35 s ME 5(1)(e)(i) OZ 3 Overpaid income tax or foreign dividend payment for pre-imputation income year Debit An ICA company has an imputation debit for an amount of overpaid income tax and foreign dividend payment (FDP) that is applied, when the company is not a foreign dividend pay- ment account (FDPA) company, to satisfy the company’s in- come tax liability under BB 1 (Imposition of income tax) for a pre-imputation income year.
Subsection (2) overrides this subsection.

No debit The debit does not include an amount of overpaid income tax and FDP that is— (a) paid before an imputation debit under section OB 41 (ICA debit for loss of shareholder continuity); and no more than the debit for loss of shareholder continuity.

(b) Table references The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 11 (overpayment of income tax or FDP).
The imputation debit in subsection (2)(a) is referred (1) (2) (3) 2184 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OZ 5 (4) to in table O2: imputation debits, row 14 (debit for loss of shareholder continuity).

Debit date The debit date is the day the amount is applied.
Deﬁned in this Act: amount, company, FDP, FDPA company, ICA company, imputation credit account, imputation debit, income tax, income tax liability, pay, pre-imputation income year, shareholder Compare: 2004 No 35 s ME 5(1)(n) OZ 4 Terminating modiﬁcations to debits for loss of shareholder continuity The terminating modiﬁcations that apply under section OA 8(8) (Shareholder continuity requirements for memorandum accounts) are— (a) the shareholder continuity requirement does not apply to a credit that arises on or before 16 December 1988; and credits arising after 16 December 1988 and before 1 April 1992 are treated as 1 credit arising on 1 April 1992 and, until such time as the credit can be treated as cancelled by later debits,— (i) (b) the shareholder continuity requirement applying to the credit is the earlier version of the require- ment incorporated in section 394E(2)(g) of the Income Tax Act 1976 (despite its repeal and re- placement by section 51 of the Income Tax Act Amendment Act (No 2) 1992); and the earlier version of the requirement of section 394E(2)(g) applies by reading the ﬁgure “66” in- stead of the ﬁgure “75”.
(ii) Deﬁned in this Act: shareholder Compare: 2004 No 35 ss ME 5(4), MG 5(4) OZ 5 ASCA lost excess available subscribed capital (1) When this section applies This section applies when a public unit trust or a group invest- ment fund that derives category A income— (a) is in existence between 17 October 2002 and 30 Sep- tember 2003 (both dates inclusive); and 2185 Part O s OZ 5 Income Tax Act 2007 Reprinted as at 1 January 2010 (b) (c) (d) has redeemed a unit in the trust or fund; and the slice rule was used to determine the tax treatment of the proceeds from the redemption; and the amount paid on subscription for a unit is less than the amount paid on redemption.
(2) Calculating opening balance The trust or fund may choose for the period to calculate an opening credit balance using 1 of the methods set out in sub- sections (3) and (4).

Method 1 (3) Method 1 requires the trust or fund to calculate the actual amount of available subscribed capital lost, that is the differ- ence, in total, between the amount paid on subscription for a unit and the amount paid on redemption of the unit.
Method 2 (4) Method 2 requires the trust or fund to make a calculation for the notional winding up of the trust or fund by taking the fol- lowing steps: (a) step 1: determine the total amount of income tax that would be payable on liquidation, treating the value of assets and liabilities as determined at their market value at the date of the notional liquidation according to pro- visions applying at that date: step 2: determine the amount of notional credits that are available after notional tax is paid in relation to them: step 3: determine the amount of notional credits re- quired to fully impute, for each unit holder, the payment of a redemption dividend, and aggregate the amounts, applying the maximum imputation ratio to the total amount: step 4: establish the imputation credit shortfall between the notional credits under step 2 and the credits required under step 3.
(b) (c) (d) Opening balance The amount of the opening balance is— (a) (b) the amount of the difference for method 1; and the shortfall referred to in subsection (4)(d) for method 2.
(5) 2186 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OZ 6 (6) (7) Certain causes of shortfalls For the purposes of subsection (4), the structural features of the taxation and imputation systems that would allow a company that does not issue shares on terms subject to section CD 22(4) (Returns of capital: off-market share cancellations) to fully impute a distribution made on the liquidation of the company, include the tax effects of— (a) non-taxable gains and losses, including exempt income; and imputation credits lost because shareholder continuity is lost; and foreign tax credits; and retained earnings generated before the trust or fund es- tablished an imputation credit account.
(b) (c) (d) (b) Date of notional liquidation, orderly calculations For the purposes of this section,— (a) the date of notional liquidation is the date chosen by the trust or fund falling in the period referred to in subsec- tion (1)(a): a calculation under this section must be undertaken in a manner consistent with the preparation of ﬁnancial statements and unit pricing calculations, based on an orderly realisation of assets in the ordinary course of business and demonstrable market valuations.
Deﬁned in this Act: amount, available subscribed capital, business, category A income, company, dividend, exempt income, ﬁnancial statements, foreign tax, group investment fund, imputation credit, imputation credit account, imputation ratio, liquidation, pay, public unit trust, share, shareholder, slice rule Compare: 2004 No 35 ss MJ 1(2), MJ 4 Section OZ 5(6)(a): substituted (with effect on 30 June 2009), on 6 October 2009, by section 485(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OZ 6 ASCA redemption of unused investments (1) When this section applies The section applies when a public unit trust or a group invest- ment fund that derives category A income— (a) redeems a share within the meaning in paragraphs (c) and (d) of the deﬁnition of share in section YA 1 (Def- initions); and 2187 Part O s OZ 7 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) (3) (b) has never established an ASC account.
Election The company may choose to establish an ASC account, and the only ASC credit arising in the account is an ASC credit for an opening balance calculated under section OZ 5(5).

Closing balance An opening balance under subsection (2) is treated as the clos- ing balance of the account.
Deﬁned in this Act: ASC account, ASC credit, category A income, complying trust, group investment fund, public unit trust, share Compare: 2004 No 35 s MJ 7 OZ 7 Memorandum accounts in transitional period Sections OZ 8 to OZ 15 apply for a period (the transitional period)— (a) beginning the ﬁrst day of a person’s 2008-09 income year; and ending on 31 March 2010.
(b) Deﬁned in this Act: income year Compare: 2004 No 35 ss MZ 10(1)(a), MZ 11(1)(a), MZ 12(1)(a), MZ 13(1)(a), MZ 14(1)(a), MZ 15(1)(a), MZ 16(1)(a), MZ 17(1)(a) Section OZ 7: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OZ 8 Attaching imputation credits and FDP credits: maximum permitted ratio When this section applies This section applies when— (a) (b) a company pays a dividend in the transitional period; and the company has a credit balance in its imputation credit account and FDP account from income, expenditure, memorandum account debits, credits, and balances, re- funds, tax, tax credits, transfers, amounts withheld, or other items dealt with, arising, or calculated using an old company tax rate.
Rate applying for transitional period If the amount of the imputation credit or FDP credit attached to the dividend is limited by the maximum permitted ratio set (1) (2) 2188 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OZ 9 out in section OA 18 (Calculation of maximum permitted ra- tios), the company may choose to treat the item tax rate in the formula in section OA 18(2) as 33%.
Deﬁned in this Act: amount, company, dividend, FDP account, FDP credit, imputation credit, imputation credit account, income, maximum permitted ratio, tax credit, tax year, transitional period Compare: 2004 No 35 s MZ 13 Section OZ 8: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OZ 9 Benchmark dividends: ratio change (1) (2) (3) When this section applies This section applies when— (a) (b) (c) a company pays a dividend in the transitional period; and the dividend is a later dividend for the purposes of sec- tions OB 61(4) and OC 28(4) (which relate to the bench- mark dividend rules), as applicable; and the relevant benchmark dividend— (i) (ii) was 1 to which section OZ 8 applied; or has a ratio of 33/67, for a reason other than the application of section OZ 8.
When ratio treated as same as ratio for benchmark dividend If, in the cases set out in subsection (3), the imputation ratio or FDP ratio of the later dividend is less than that of the relevant benchmark dividend, the ratio is treated as the same as that of the relevant benchmark dividend.
Cases The cases referred to in subsection (2) are the following: (a) in the case of a benchmark dividend described in sub- section (1)(c)(i), section OZ 8 does not apply to the later dividend through the lack of a relevant credit balance described in section OZ 8 (1)(b): in the case of a benchmark dividend described in sub- section (1)(c)(ii), the later dividend has a ratio of 30/70.
Deﬁned in this Act: benchmark dividend, company, dividend, FDP ratio, im- putation ratio, transitional period Compare: 2004 No 35 s MZ 14 (b) Section OZ 9: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
2189 Part O s OZ 10 Income Tax Act 2007 Reprinted as at 1 January 2010 OZ 10 Modifying ratios for imputation credits and FDP credits (1) (2) When this section applies This section applies when— (a) a person derives a dividend in the period from 1 October 2007 to 31 March 2010; and the dividend and the imputation credits and FDP credits attached to the dividend, as applicable, have — an imputation ratio greater than 30/70 and less than or equal to 33/67; or an FDP ratio greater than 30/70 and less than or equal to 33/67; or a combined imputation and FDP ratio greater than 30/70 and less than or equal to 33/67.
(b) (i) (ii) (iii) Ratio applying For the purposes of sections LE 8, LE 9, LF 6, and LF 7 (which relate to tax credits for imputation credits and FDP credits), if the amount of the imputation credit or FDP credit, as ap- plicable, is limited by the maximum permitted ratio set out in section OA 18 (Calculation of maximum permitted ratios), the relevant ratio is treated as 33/67.
Deﬁned in this Act: combined imputation and FDP ratio, dividend, FDP credit, FDP ratio, imputation credit, imputation ratio, maximum permitted ratio, tran- sitional period Compare: 2004 No 35 s MZ 15 Section OZ 10: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OZ 10(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 486(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
OZ 11 Tax credits for imputation credits and FDP credits When this section applies This section applies when— (a) (b) a person derives a dividend in the transitional period; and the dividend, and the imputation credits and FDP credits attached to the dividend, as applicable, have— (i) an imputation ratio greater than 30/70 and less than or equal to 33/67; or (1) 2190 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OZ 11 (2) (3) (4) (5) (ii) (iii) an FDP ratio greater than 30/70 and less than or equal to 33/67; or a combined imputation and FDP ratio greater than 30/70 and less than or equal to 33/67; and (c) the person is a new tax rate person in the period for the dividend.
Imputation ratio and FDP ratio For a ratio described in subsection (1)(b)(i) or (ii), the amount of the tax credit that the person has is calculated using the formula dividend and credits × 0.30.
Deﬁnition of item in formula In the formula in subsection (2), dividend and credits is the amount of the imputation credit or FDP credit, as applicable, included in the person’s assessable income for the purposes of section LE 1(1) or LF 1(1) (which relate to tax credits for imputation credits and FDP credits), together with the amount of dividend to which the relevant credit is attached.
Combined imputation and FDP ratio For a ratio described in subsection (1)(b)(iii), the total amount of tax credit that the person has is calculated using the for- mula— dividend and credits × 0.30.

Deﬁnition of item in formula In the formula in subsection (4), dividend and credits is the total amount of the imputation credit and FDP credit included in the person’s assessable income for the purposes of section LE 1(1) and LF 1(1), together with the amount of the dividend to which the credits are attached.
For the purposes of the cal- culation of the total tax credit, imputation credits are reduced before FDP credits.

Deﬁned in this Act: amount, assessable income, basic tax rate, combined im- putation and FDP ratio, dividend, FDP credit, FDP ratio, imputation credit, im- putation ratio, tax credit, total tax credit, transitional period Compare: 2004 No 35 s MZ 16 Section OZ 11: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
2191 Part O s OZ 12 Income Tax Act 2007 Reprinted as at 1 January 2010 OZ 12 Tax credits for non-resident investors When this section applies This section applies when— (a) (b) (i) (ii) (c) a company pays or derives a dividend with an imput- ation credit attached in the transitional period; and the dividend and imputation credit, to the extent to which, in the absence of subpart LP (Tax credits for supplementary dividends),— the combined imputation and FDP ratio is greater than 30/70 and less than or equal to 33/67; or the imputation ratio is greater than 30/70 and less than or equal to 33/67; and section LP 2(1) (Tax credits for supplementary divi- dends) applies to the company, or the company is a sup- plementary dividend holding company.
When ratio equal to old rate For a ratio described in subsection (1)(b)(i) or (ii) that is equal to 33/67, then any tax credit that the company has is calculated using the formula in section LP 2(2), treating 7/17 as 67/187.
When ratio less than old rate For a ratio described in subsection (1)(b)(i) or (ii) that is less than 33/67, then, to the extent to which a part of the amount of the dividend and imputation credit has a ratio of 33/67 through the application of section OZ 8, any tax credit that the company has is calculated using the formula in section LP 2(2), treating 7/17 as 67/187.
Benchmark calculations In the application of sections GB 35, GB 36, OA 18, OB 60, OB 61, OC 28 (which relate to imputation and FDP credit ratios) under section LP 5 (Application of benchmark dividend rules and imputation credit ratio), the provisions apply using the ratio 33/67 and the old company tax rates.
Relationship with exempt income rules If the company derives a dividend to which this section ap- plies, item tax rate in the formula in section LP 8(2) (Rela- tionship with exempt income rules) is treated as 33%, to the (1) (2) (3) (4) (5) 2192 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OZ 14 extent to which a part of the supplementary dividend was cal- culated as described in subsection (2) or (3).
Deﬁned in this Act: amount, combined imputation and FDP ratio, company, dividend, imputation credit, imputation ratio, non-resident, pay, supplemen- tary dividend, supplementary dividend holding company, tax credit, transitional period Compare: 2004 No 35 s MZ 17 Section OZ 12: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section OZ 12(2): amended (with effect from 1 April 2008), on 29 May 2008, by section 37(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remed- ial Matters) Act 2008 (2008 No 36).

Section OZ 12(3): amended (with effect from 1 April 2008), on 29 May 2008, by section 37(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remed- ial Matters) Act 2008 (2008 No 36).
OZ 13 Fully credited dividends: modifying actual ratio (1) (2) What this section applies to This section applies in the transitional period to a dividend for which, in the absence of this section, the actual ratio under sec- tion CD 43(26) (Available subscribed capital (ASC) amount) is greater than 30/70 and less than or equal to 33/67.

Ratio for calculation In the calculation under section CD 43(26), the part of the dividend that is fully credited, the actual ratio is treated as 30/70.
Deﬁned in this Act: dividend, fully credited, transitional period Compare: 2004 No 35 s MZ 18 Section OZ 13: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

OZ 14 Dividends from qualifying companies (1) (2) When this section applies This section applies when— (a) a qualifying company pays a dividend in the transitional period; and section OZ 8 applies to the dividend.
(b) Exempt income In the calculation under section HA 14 (Dividends paid by qualifying companies) the extent to which the dividend is ex- 2193 Part O s OZ 15 Income Tax Act 2007 Reprinted as at 1 January 2010 empt income of the person, item tax rate in the formula in section HA 15(2) (Fully imputed dividends) is treated as 0.33.
Deﬁned in this Act: dividend, exempt income, qualifying company, transitional period Compare: 2004 No 35 s MZ 19 Section OZ 14: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OZ 15 Attaching imputation credits and notional distributions: modifying amounts When this section applies This section applies when— (a) (b) a statutory producer board or a co-operative company determines to pay a cash distribution or make a notional distribution in the transitional period; and the board or company has a credit balance in its imput- ation credit account from income, expenditure, memo- randum account debits, credits, and balances, refunds, tax, tax credits, transfers, amounts withheld, or other items dealt with, arising, or calculated using an old com- pany tax rate.
Statutory producer boards’ imputation credits In the calculation under section OB 73(4) (Statutory producer boards attaching imputation credits to cash distributions), the board may choose to treat item tax rate in the formula as 33%.

Statutory producer boards’ notional distributions In the calculation under section OB 75(2) (Statutory producer boards’ notional distributions that are dividends), the board may choose to treat item tax rate in the formula as 33%.
Co-operative companies’ imputation credits In the calculation under section OB 78(3) (Co-operative com- panies attaching imputation credits to cash distributions), the company may choose to treat item tax rate in the formula as 33%.

This subsection does not apply to a Maori authority.
Co-operative companies’ notional distributions In the calculation under section OB 80(2) (Co-operative com- panies’ notional distributions that are dividends), the company (1) (2) (3) (4) (5) 2194 Reprinted as at 1 January 2010 Income Tax Act 2007 Part O s OZ 17 may choose to treat item tax rate in the formula as 33%.

This subsection does not apply to a Maori authority.
Deﬁned in this Act: amount, co-operative company, imputation credit account, income, Maori authority, statutory producer board, tax credit, transitional period Compare: 2004 No 35 s MZ 20 Section OZ 15: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OZ 16 BETA reductions (1) (2) What this section applies to This section applies to— (a) (b) a credit and a debit in the branch equivalent tax account of a company or a consolidated group before the ﬁrst day of their 2008–09 income year: a credit and a debit arising to the branch equivalent tax account of a company or a consolidated group on or after the ﬁrst day of their 2008–09 income year, if the credit and debit relate to their 2007–08 or earlier income years.
Reduction The amount of the credit and debit are reduced by multiplying the amount by 30/33.

Deﬁned in this Act: amount, branch equivalent tax account, company, consoli- dated group, income year Compare: 2004 No 35 s MZ 21 Section OZ 16: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
OZ 17 CTRA reductions (1) What this section applies to This section applies to— (a) (b) a credit and a debit in the CTR account of a company or a consolidated group before the ﬁrst day of their 2008–09 income year: a credit and a debit arising to the CTR account of a company or a consolidated group on or after the ﬁrst day of their 2008–09 income year, if the credit and debit relate to their 2007–08 or earlier income years.
2195 Part R s RA 1 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Reduction The amount of the credit and debit are reduced by multiplying the amount by 30/33.

Deﬁned in this Act: amount, company, consolidated group, CTR account, in- come year Compare: 2004 No 35 s MZ 22 Section OZ 17: added, on 1 April 2008, by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Part R General collection rules Subpart RA—General withholding and payment obligations Introductory provisions RA 1 What this Part does This Part provides the rules to require a person to pay to the Commissioner interim and terminal payments of tax and other amounts payable under the Inland Revenue Acts.
The Part provides for— (a) a person’s general withholding and payment obliga- tions; and the payment of terminal tax, see subpart RB; and the payment of provisional tax, see subpart RC; and the payment of the following employment-related taxes, see subpart RD: (i) (ii) (iii) pay-as-you-earn (PAYE): fringe beneﬁt tax (FBT): employer’s (ESCT); and superannuation contribution tax (b) (c) (d) (e) (f) (g) (gb) (h) the payment of resident withholding tax (RWT), see subpart RE; and the payment of non-resident withholding tax (NRWT), see subpart RF; and [Repealed] the payment of retirement scheme contribution tax (RSCT), see subpart RH; and the treatment of refunds by the Commissioner, see sub- part RM; and 2196 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RA 3 (i) the use of intermediaries in the tax system, see subpart RP.
Deﬁned in this Act: amount, Commissioner, employer’s superannuation con- tribution, ESCT, FBT, fringe beneﬁt tax, Inland Revenue Acts, intermediary, NRWT, pay, PAYE, provisional tax, retirement scheme contribution, RSCT, RWT, tax, terminal tax Section RA 1(g): repealed (with effect on 30 June 2009), on 6 October 2009, by section 488(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 1(gb): inserted, on 1 April 2008, by section 521(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RA 1 list of deﬁned terms FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 488(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 1 list of deﬁned terms retirement scheme contribution: inserted, on 1 April 2008, by section 521(2) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).

Section RA 1 list of deﬁned terms RSCT: inserted, on 1 April 2008, by section 521(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
RA 2 Amounts treated as income tax The provisions of this Act and the Tax Administration Act 1994 apply in relation to an amount that a person is liable to pay under this Part as if the amount were income tax imposed under section BB 1 (Imposition of income tax).
Deﬁned in this Act: amount, income tax, pay Compare: 2004 No 35 ss MB 12, NC 20(1), ND 1W(2), NE 7(2), NF 13, NG 17(2), NH 3(7) Section RA 2 compare note: amended (with effect on 1 April 2008), on 7 De- cember 2009, by section 101(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Payment and withholding obligations RA 3 Terminal tax obligations A person liable under section BC 8 (Satisfaction of income tax liability) to pay an amount of terminal tax for a tax year must pay the amount to the Commissioner under subpart RB (Terminal tax) by the due date.
Deﬁned in this Act: amount, Commissioner, pay, tax year, terminal tax Compare: 2004 No 35 ss BC 9, MC 1 2197 Part R s RA 4 Income Tax Act 2007 Reprinted as at 1 January 2010 RA 4 Provisional tax obligations A person liable to pay provisional tax must pay instalments on account of their income tax liability for a tax year to the Commissioner under subpart RC (Provisional tax) by the due dates.
Deﬁned in this Act: Commissioner, income tax liability, pay, provisional tax, tax year Compare: 2004 No 35 ss BB 2(3), MB 4 RA 5 Tax obligations for employment-related taxes Withholding and payment obligations A person who makes a payment or provides a beneﬁt of 1 of the following kinds must either withhold and pay, or pay, the amount of tax for the payment or beneﬁt to the Commis- sioner under subpart RD (Employment-related taxes) by the due dates: (a) (b) (c) a PAYE income payment: a fringe beneﬁt: an employer’s superannuation cash contribution.
Timing for PAYE income payments An amount of tax withheld from a PAYE income payment must be withheld at the time the person makes the payment.
Deﬁned in this Act: amount of tax, Commissioner, employer’s superannuation cash contribution, fringe beneﬁt, pay, PAYE income payment Compare: 2004 No 35 ss BE 1(1), (4), (5), NC 15, ND 1, NE 3 Section RA 5(1) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 489(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 5(1)(c): substituted (with effect on 1 April 2008), on 6 October 2009, by section 489(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 5(2) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 489(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 5(2): added (with effect on 1 April 2008), on 6 October 2009, by section 489(3) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).

Section RA 5 list of deﬁned terms employer’s superannuation cash contri- bution: inserted (with effect on 1 April 2008), on 6 October 2009, by section 489(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(1) (2) 2198 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RA 6 Section RA 5 list of deﬁned terms employer’s superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 489(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
RA 6 Withholding and payment obligations for passive income (1) (2) (3) (4) Resident passive income A person who makes a payment of resident passive income must withhold and pay RWT for the payment to the Commis- sioner under subpart RE (Withholding tax on resident passive income (RWT)) by the due dates.
Non-resident passive income A person who makes a payment of non-resident passive in- come must withhold and pay NRWT for the payment to the Commissioner under subpart RF (Withholding tax on non- resident passive income (NRWT)) by the due dates.

Foreign dividends [Repealed] [Repealed] Timing for payments of passive income An amount of tax withheld under subsections (1) and (2) must be withheld at the time the person makes the payment.
Deﬁned in this Act: Commissioner, company, non-resident passive income, NRWT, pay, resident passive income, RWT Compare: 2004 No 35 ss BE 1(4)–(6), NF 4, NG 11, NH 3 Section RA 6(3) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 490(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 6(3): repealed (with effect on 30 June 2009), on 6 October 2009, by section 490(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 6(4) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 490(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 6(4): inserted (with effect on 1 April 2008), on 6 October 2009, by section 490(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 6 list of deﬁned terms FDP: repealed (with effect on 1 April 2008), on 6 October 2009, by section 490(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 6 list of deﬁned terms foreign dividend: repealed (with effect on 1 April 2008), on 6 October 2009, by section 490(3) of the Taxation 2199 Part R s RA 6B Income Tax Act 2007 Reprinted as at 1 January 2010 (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
RA 6B Withholding and payment obligations for retirement scheme contributions A person who makes a contribution to a retirement savings scheme must withhold and pay RSCT for the contribution to the Commissioner under subpart RH (Withholding tax on re- tirement scheme contributions) by the due dates.
Deﬁned in this Act: Commissioner, pay, retirement savings scheme, RSCT Compare: 2004 No 35 s NEB 1 Section RA 6B: inserted, on 1 April 2008, by section 522 of the Taxation (Busi- ness Taxation and Remedial Matters) Act 2007 (2007 No 109).

RA 7 Payment of tax by public authorities A public authority that pays an amount under this Act acts within its capacity, whether further appropriation is made or not.
Deﬁned in this Act: amount, pay, public authority Compare: 2004 No 35 s MH 1 RA 8 Liability of persons receiving payments or beneﬁts Despite sections RA 5 and RA 6, a person receiving or deriving a payment or beneﬁt in relation to which an amount of tax must be withheld or paid may be liable under this Part for payment of the tax.
Deﬁned in this Act: amount of tax, pay, tax Compare: 2004 No 35 ss NC 16, NE 2A(1), (2), NF 3, NG 12 RA 9 Treatment of amounts withheld as received Payments treated as received or derived An amount withheld from a payment under this Part, unless a provision in this Part states otherwise,— (a) by the person to whom the payment is made; and at the time the payment is made; and is treated as received— (i) (ii) is treated for the purposes of this Act as derived by the person at the same time and in the same way as they (b) (1) 2200 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RA 10 (2) derive the payment from which the amount is withheld; and includes a combined tax and earner-related payment.
(c) Exclusion Subsection (1) does not apply to a replacement payment under a share-lending arrangement.
Deﬁned in this Act: amount, combined tax and earner-related payment, pay, replacement payment, share-lending arrangement Compare: 2004 No 35 ss NC 19, NE 6, NF 12, NG 15 RA 10 When obligations not met (1) (2) (3) (4) When this section applies This section applies when— (a) a person liable to withhold an amount of tax for a PAYE income payment, an employer’s superannuation cash contribution, a retirement scheme contribution, a pay- ment of resident passive income, or a payment of non- resident passive income, does not withhold and pay the amount to the Commissioner; or a person liable to pay an amount of tax to the Commis- sioner for a fringe beneﬁt does not pay the amount.
[Repealed] (b) (c) Debt payable to Commissioner The amount is a debt payable to the Commissioner.

When payable The amount is due to be paid to the Commissioner on the rele- vant due date after the end date for the original liability set out in section RA 15.

Premiums and levies The amount includes a combined tax and earner-related pay- ment.
Deﬁned in this Act: amount, amount of tax, combined tax and earner-related payment, Commissioner, employer’s superannuation cash contribution, fringe beneﬁt, non-resident passive income, pay, PAYE income payment, resident pas- sive income Compare: 2004 No 35 ss NC 5(2), NC 16, NC 20(1), ND 1, ND 1W(2), NE 5, NEB 4(1), NF 3, NF 4, NF 13, NG 12, NG 13 2201 Part R s RA 11 Income Tax Act 2007 Reprinted as at 1 January 2010 Section RA 10(1)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 491(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 10(1)(a): amended, on 1 April 2008, by section 523(1) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RA 10(1)(b): amended (with effect on 30 June 2009), on 6 October 2009, by section 491(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 10(1)(c): repealed (with effect on 30 June 2009), on 6 October 2009, by section 491(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 10 list of deﬁned terms employer’s superannuation cash contri- bution: inserted (with effect on 1 April 2008), on 6 October 2009, by section 491(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 10 list of deﬁned terms employer’s superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 491(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 10 list of deﬁned terms FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 491(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 10 compare note: amended, on 1 April 2008, by section 523(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
RA 11 Adjustment to correct errors: certain underpayments When this section applies This section applies when— (a) a person (the payer) is required to withhold and pay to the Commissioner— (i) RWT in relation to a payment to another person (the payee) of resident passive income that is in- terest or a dividend treated as interest; or (ii) NRWT in relation to a payment to the payee of non-resident passive income; and (b) the payer, through an error, does not withhold some or all of the amount.
Amount withheld from later payment or recovered The payer may— (a) subtract from a later payment to the payee an amount to correct the deﬁciency; or (1) (2) 2202 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RA 12 (b) recover from the payee an amount to correct the deﬁ- ciency.
(3) Requirements when withholding from later payment For the purposes of subsection (2)(a),— (a) the later payment must be a payment of interest, a divi- dend treated as interest, or a payment of non-resident passive income, as applicable; and the payment must be made in the same tax year in which the ﬁrst payment is made.
(b) Deﬁned in this Act: amount, Commissioner, dividend treated as interest, inter- est, non-resident passive income, NRWT, pay, resident passive income, RWT, tax year Compare: 2004 No 35 ss NF 6(1), NG 16A(1) RA 12 Adjustment to correct errors: certain excess amounts (1) (2) When this section applies This section applies when— (a) a person (the payer) is required to withhold and pay to the Commissioner an amount of RWT or NRWT for a payment to another person (the payee); and the payer, through an error, withholds an amount (the excess amount) that is more than the amount required under this Part.
(b) Refunding excess amount of resident passive income For a payment of resident passive income, the payer may pay the excess amount to the payee at any time before the end of the tax year in which the amount of tax is withheld if,— (a) for a payment of interest or a dividend treated as in- terest, an RWT withholding certiﬁcate relating to the amount has either not been sent out or has been returned and cancelled: for a payment of a dividend other than a dividend treated as interest, a shareholder dividend statement relating to the amount has either not been sent out for the purposes of section 29 of the Tax Administration Act 1994 or has been returned and cancelled: for a taxable Maori authority distribution, a notice relat- ing to the amount has either not been given to a member (b) (c) 2203 Part R s RA 12 Income Tax Act 2007 Reprinted as at 1 January 2010 of the Maori authority under section 31 of that Act or has been returned and cancelled.
Treatment of amount For the purposes of this section, when the payer pays the ex- cess amount under subsection (2), the amount is no longer treated as RWT.

Amendments to notices If the RWT withholding certiﬁcate, shareholder dividend state- ment, or notice referred to in subsection (2)(c) has been re- turned or cancelled, the payer must provide the payee with an amended certiﬁcate, statement, or notice, as applicable.
Commissioner refunding overpayment If the excess amount has been paid to the Commissioner, the Commissioner must refund the amount of the overpayment to— (a) (b) the payee; or the payer, if they have not subtracted the amount under subsection (6)(a) from a later payment made in relation to the payee.
Payer’s options For the purposes of subsection (5), if the excess amount has been refunded to the payee, the payer may— (a) subtract the amount from an amount paid later to the Commissioner under section RE 21 or RF 13 (which relate to resident passive income and non-resident pas- sive income), noting the action in the statement required under section 50 of the Tax Administration Act 1994; or apply for a refund of the amount under section RM 8 (Overpaid RWT or NRWT).
(b) Overpayment through payee’s act or omission Despite subsections (2) and (5), if the excess amount arises from an act or omission by the payee, the payer must pay the full amount withheld to the Commissioner and is not liable to repay the excess amount to the payee or another person.
Deﬁned in this Act: amount, amount of tax, Commissioner, dividend, dividend treated as interest, interest, Maori authority, non-resident passive income, no- tice, NRWT, pay, resident passive income, RWT, RWT withholding certiﬁcate, shareholder dividend statement, tax year, taxable Maori authority distribution Compare: 2004 No 35 ss NF 6(2)–(4), NF 7(1), (2), NG 16A(2), (3) (3) (4) (5) (6) (7) 2204 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RA 13 RA 13 Payment dates for terminal tax Payment dates (1) (2) (3) (4) When payment due A person must pay their terminal tax for a tax year by— (a) the 7th day of the month in schedule 3, part A, column G or H (Payment of provisional tax and terminal tax) for the person’s corresponding income year, unless para- graph (b) applies; and the 15th day of January, if January is the month in sched- ule 3, part A, column G or H, for the person’s corres- ponding income year.
(b) Columns G and H For the purposes of subsection (1), the month in schedule 3, part A, column G or H, for the person’s corresponding income year is— (a) the month in column H, if— (i) (ii) the person’s return of income for the income year was linked to a tax agent as described in subsec- tion (3); or the person has asked for an income statement under section 80C of the Tax Administration Act 1994 or has been sent an income statement under section 80D of that Act, and the Commissioner has been notiﬁed that a tax agent will respond to the income statement sent to the person; or (b) the month in column G in any other case.
First occurrence of month For the purposes of subsection (1),— (a) the month in column G is the ﬁrst occurrence of that month after the balance date: the month in column H is the ﬁrst occurrence of that month after the month in column G. (b) Linked to tax agent For the purposes of subsection (2)(a)(i), a return of income is linked to a tax agent if the Commissioner has been notiﬁed that 2205 Part R s RA 14 Income Tax Act 2007 Reprinted as at 1 January 2010 the return is to be ﬁled by the tax agent who has an extension of time under section 37(4) of the Tax Administration Act 1994.
Deﬁned in this Act: Commissioner, corresponding income year, income state- ment, notify, pay, return of income, tax agent, tax year, terminal tax Compare: 2004 No 35 s MC 1 Section RA 13(1)(b): amended (with effect from 1 April 2008), on 29 May 2008, by section 38(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
RA 14 Payment dates for provisional tax A person must pay their provisional tax for a tax year under section RC 9 (Provisional tax payable in instalments) accord- ing to the relevant cycle of instalments set out in schedule 3, part A, columns A to F (Payment of provisional tax and ter- minal tax).
Deﬁned in this Act: pay, provisional tax, tax year Compare: 2004 No 35 s MB 8(1), (2) RA 15 Payment dates for interim and other tax payments When this section applies This section applies when a person is required— (a) to withhold under section RA 5 an amount of tax for a payment and pay it to the Commissioner; or to withhold and pay, or pay, under section RA 6 an amount to the Commissioner for a payment received or beneﬁt provided by them; or to withhold and pay under section RA 6B an amount of tax to the Commissioner for a retirement scheme con- tribution.
(b) (c) When payment due The person must pay the amount to the Commissioner by the following dates: (a) when the period for which the payment is made is shorter than a month, by the 5th day after the relevant end date: when the period for which the payment is made is a month or a period that is longer than a month but not a period referred to in paragraph (c) or (d), by the 20th day of the month after the relevant end date: (b) (1) (2) 2206 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RA 15 (c) (cb) (d) when the period for which the payment is made is a tax year or income year or both, by 31 May: despite subsection (3)(c), for FBT payable for the last quarter of a tax year, by 31 May: for a close company that pays FBT on an income year basis, by terminal tax date.
(3) Relevant end dates In this section, an end date means 1 of the following, as ap- plicable: (a) for PAYE and ESCT payable for 2 payment periods in a month under section RD 4(1)(b) or RD 65(3) (which set out the basis for payment of PAYE and ESCT),— (i) for the ﬁrst payment period, the 15th day of the month; and for the second payment period, the last day of the month: (ii) (b) (c) (d) for PAYE, RWT, NRWT, and RSCT payable monthly under section RD 4(1)(a), RE 21(2) and (7), RF 13(3), or RH 2(2) (which set out the basis for payment of PAYE, RWT, NRWT, and RSCT), as applicable, the last day of a month: for FBT payable quarterly under sections RD 58, RD 59, and RD 62 (which set out the basis for payment of FBT), the last day of a quarter: for RWT and NRWT payable by instalment under sec- tion RE 21(3) or RF 13(2) (which set out the basis for payment of RWT and NRWT)— (i) for the ﬁrst instalment, the last day of September; and for the second instalment, the last day of March.
(ii) (4) When payment due in December Despite subsection (2), for the purposes of this section and the payment of PAYE and ESCT to the Commissioner, if the month referred to in subsection (3) is December, the payment is due by 15 January.
Discrepancies Subsection (6)— (5) 2207 Part R s RA 15 Income Tax Act 2007 Reprinted as at 1 January 2010 (a) applies when a discrepancy arises in the information that a person is required to provide under,— (i) for resident passive income, section 51(1), (4), or (5) of the Tax Administration Act 1994: for non-resident passive income, section 49(1) or (2) of that Act: (ii) (b) does not apply to an unpaid amount that the Commis- sioner assesses for a particular return period.
Payment dates If an amount of RWT or NRWT remains unpaid, the person required to withhold the amount must pay it to the Commis- sioner no later than— (a) 20 April after the end of the tax year in relation to in- formation provided under section 49(1) or 51(1) of the Tax Administration Act 1994: the last date for providing the information, in relation to information provided under section 49(2) or 51(4) or (5) of that Act.
(b) Non-resident passive income The Commissioner may extend the time for payment of NRWT.
Deﬁned in this Act: amount of tax, assessment, close company, Commissioner, end date, ESCT, FBT, ﬁrst payment period, income year, non-resident pas- sive income, NRWT, pay, PAYE, quarter, resident passive income, retirement scheme contribution, RWT, second payment period, tax year, terminal tax Compare: 2004 No 35 ss NC 15, ND 9(2), (3), ND 10, ND 13, ND 14, NE 4, NEB 3(1), NF 4, NG 11, NH 3 Section RA 15(1)(b): amended, on 1 April 2008, by section 524(1) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section RA 15(1)(c): added, on 1 April 2008, by section 524(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RA 15(2)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 492(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 15(2)(c): substituted (with effect on 1 April 2009), on 6 October 2009, by section 492(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 15(2)(c): substituted (with effect on 1 April 2008), on 6 October 2009, by section 492(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
(6) (7) 2208 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RA 16 inserted (with effect on 1 April 2009), on 6 October Section RA 15(2)(cb): 2009, by section 492(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 15(2)(d): substituted (with effect on 1 April 2008), on 6 October 2009, by section 492(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 15(3)(b): substituted, on 1 April 2008, by section 524(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RA 15(3)(c): substituted (with effect on 30 June 2009), on 6 October 2009, by section 492(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 15 list of deﬁned terms FDP: repealed (with effect on 30 June 2009), on 6 October 2009, by section 492(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 15 list of deﬁned terms retirement scheme contribution: inserted, on 1 April 2008, by section 524(3) of the Taxation (Business Taxation and Re- medial Matters) Act 2007 (2007 No 109).
Section RA 15 compare note: amended, on 1 April 2008, by section 524(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

RA 16 Payment date when taxable activity ends (1) (2) (3) When this section applies This section applies for a month when a registered person is required under section RA 6 to withhold and pay RWT or NRWT, and the person— (a) (b) stops carrying on a taxable activity; or no longer carries on a taxable activity in New Zealand.
Payment to Commissioner The person must pay to the Commissioner by the 20th day of the next month the total amount of tax for all payments relating to the taxable activity to the extent to which an amount of tax remains unpaid.

Exemption continuing This section does not apply for resident passive income if the person continues to hold an RWT exemption certiﬁcate.
Deﬁned in this Act: amount of tax, Commissioner, NRWT, pay, registered per- son, resident passive income, RWT, RWT exemption certiﬁcate, taxable activity Compare: 2004 No 35 ss NF 4(5), NG 11(4) 2209 Part R s RA 17 Income Tax Act 2007 Reprinted as at 1 January 2010 RA 17 Payment date when RWT exemption certiﬁcate expires (1) (2) (3) When this section applies This section applies in relation to a month of a tax year when an RWT exemption certiﬁcate of a person expires.
Payment to Commissioner The person must pay to the Commissioner by the 20th day of the month following that in which the certiﬁcate expires the total amount of tax withheld by them to the extent to which the amount remains unpaid.

Exclusion This section does not apply if the person continues to be re- quired to withhold RWT through the carrying on of a taxable activity.
Deﬁned in this Act: amount of tax, Commissioner, pay, RWT, RWT exemption certiﬁcate, tax withheld, tax year, taxable activity Compare: 2004 No 35 s NF 4(6) RA 18 Payment date for emigrating companies (1) (2) When this section applies This section applies to an emigrating company that is treated under section FL 2 (Treatment of emigrating companies and their shareholders) as paying a distribution to a shareholder.
Payment On or before the date that is 3 months after the time of emigra- tion, the company must pay to the Commissioner all amounts of tax for resident passive income or non-resident passive in- come withheld in relation to the distribution.
Deﬁned in this Act: amount of tax, Commissioner, emigrating company, non- resident passive income, pay, resident passive income, shareholder, time of emi- gration Compare: 2004 No 35 ss NF 4(6B), NG 11(4B) Refunds RA 19 Refunds of excess amounts or when amounts mistakenly paid When this section applies This section applies for a person (the payer) and the withhold- ing of an amount of tax that is more than the amount required (1) 2210 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RA 20 to be withheld and paid under this Part (the excess amount) or an amount mistakenly paid, when— (a) the payer withholds and pays to the Commissioner an excess amount of RWT or NRWT: the payer pays FDP of an excess amount: a PAYE intermediary pays an amount of tax for an em- ployer through an error, or when the payment is not funded by the employer, as described in section RM 7 (Refunds to PAYE intermediaries): the result of a calculation for FBT made by an em- ployer under sections RD 50 to RD 53 (which relate to attributed beneﬁts and non-attributed beneﬁts) is nega- tive.
(b) (c) (d) (2) Refunds The Commissioner must refund the excess amount to the payer.
Deﬁned in this Act: amount, amount of tax, Commissioner, employer, FBT, FDP, NRWT, pay, PAYE intermediary, RWT Compare: 2004 No 35 ss NBA 7, ND 10(4)(a), NF 7(1), NG 16, NH 4 RA 20 Amalgamation of companies Amalgamations (1) (2) Amalgamated company’s obligation If an amalgamating company ends its existence on a resident’s restricted amalgamation, an unsatisﬁed obligation that the amalgamating company has at the time of the amalgamation to withhold and pay an amount of tax to the Commissioner under this Part is treated as an obligation of the amalgamated company.
Thresholds for close companies For the purpose of determining whether the threshold under section RD 60 (Close company option) has been met, the amal- gamated company is treated as paying the gross amounts of tax withheld under section RA 5(1)(a) and (c) by the amalgamat- 2211 Part R s RA 21 Income Tax Act 2007 Reprinted as at 1 January 2010 ing company in the income year before that in which the amal- gamation takes place.
Deﬁned in this Act: amalgamated company, amalgamating company, amal- gamation, amount of tax, close company, Commissioner, gross, income year, pay, resident’s restricted amalgamation Compare: 2004 No 35 ss NC 15(7), ND 13(8), ND 14(8), NEB 3(2), NH 4(8) Section RA 20(1) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 493(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 20(2) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 493(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 20(2): added (with effect on 1 April 2008), on 6 October 2009, by section 493(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 20 list of deﬁned terms amalgamation: inserted (with effect on 1 April 2008), on 6 October 2009, by section 493(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 20 list of deﬁned terms close company: inserted (with effect on 1 April 2008), on 6 October 2009, by section 493(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 20 list of deﬁned terms gross: inserted (with effect on 1 April 2008), on 6 October 2009, by section 493(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

inserted (with effect on Section RA 20 list of deﬁned terms income year: 1 April 2008), on 6 October 2009, by section 493(3) of the Taxation (Inter- national Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 20 compare note: amended, on 1 April 2008, by section 525 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
RA 21 Regulations Regulations PAYE income payments The Governor-General may make regulations by Order in Council to— (a) declare a particular payment, or particular class of pay- ments, to be included in, or excluded from, the deﬁn- ition of— (i) (ii) salary or wages; or extra pay; or (1) 2212 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RA 21 (b) (c) schedular payment: (iii) provide further rules in relation to schedular payments as set out in subsection (2): provide that the regulations do not apply to a particu- lar person, or class or persons, on notiﬁcation from the Commissioner.
(2) Schedular payments For the purposes of subsection (1)(b), regulations may be made under this Act or the Tax Administration Act 1994 in relation to schedular payments for the following purposes: (a) to set the amount of tax for a particular schedular pay- ment or particular class of schedular payment: to provide that the Commissioner may, if a person asks, set the rate of tax for a schedular payment to the person: to provide that the amount of tax for a particular schedu- lar payment, class of schedular payment, or schedular payments under a particular threshold is the person’s income tax liability in relation to the relevant kind of income: to provide that an amount of tax must be withheld and paid despite any assignment or charge.
(b) (c) (d) (3) Employment-related loans The Governor-General may make regulations by Order in Council to declare the rate of interest applying to employ- ment-related loans.

Application to quarters (4) When regulations referred to in subsection (3) are made, they apply to quarters starting from a date at least 1 month follow- ing the date the regulations were made.
Regulations that re- duce the rate of interest from the prescribed rate of interest at the time, if made at least 1 month before the quarter ends, may apply for that quarter.
Deﬁned in this Act: amount of tax, employment-related loan, extra pay, income, income tax liability, interest, notify, pay, prescribed rate of interest, quarter, salary or wages, schedular payment, tax Compare: 2004 No 35 ss NC 21, ND 1F Section RA 21(4): amended (with effect on 1 April 2008), on 6 October 2009, by section 494 of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
2213 Part R s RA 22 Income Tax Act 2007 Reprinted as at 1 January 2010 Application of other provisions RA 22 Limits on application of other provisions for purposes of PAYE rules (1) Amounts not separated For an amount of tax not withheld and paid to the Commis- sioner, the provisions listed in subsection (2) do not require— the separate identiﬁcation of the amounts of a combined (a) tax and earner-related payment that are attributable to— an amount of tax for a PAYE income payment (i) that an employer or PAYE intermediary is re- quired to make under the PAYE rules: an amount that an employer must subtract under the sections referred to in subsection (2)(b) to (d): the bringing of separate proceedings or separate treat- ment for the collection, recovery, or imposition of penalties in relation to an amount of a combined tax and earner-related payment.
(ii) (b) (2) Provisions The sections referred to in subsection (1) are— (a) sections 143, 143A, and 156 to 165 of the Tax (b) (c) (d) Administration Act 1994: section 115 of the Accident Rehabilitation and Com- pensation Insurance Act 1992: section 285 of the Accident Insurance Act 1998: section 221 of the Injury Prevention, Rehabilitation, and Compensation Act 2001.
Deﬁned in this Act: amount, amount of tax, combined tax and earner-related payment, Commissioner, employer, pay, PAYE income payment, PAYE inter- mediary, PAYE rules Compare: 2004 No 35 s NC 20 RA 23 Application of other provisions for purposes of ESCT rules and NRWT rules References For the purposes of the ESCT rules and the NRWT rules, sec- tions 167 and 169 of the Tax Administration Act 1994 apply, modiﬁed as necessary, as if— (1) 2214 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RA 24 (2) (a) (b) (c) a reference to an amount of tax withheld were a refer- ence to ESCT or NRWT, as applicable: a reference to an employer were a reference to a person required to withhold and pay ESCT or NRWT, as ap- plicable: a reference to the PAYE rules were a reference to the ESCT rules or the NRWT rules.
Exclusion [Repealed] [Repealed] Deﬁned in this Act: amount of tax, employer, ESCT, ESCT rules, NRWT, NRWT rules, pay, PAYE rules, tax withheld Compare: 2004 No 35 ss NE 7, NG 17(1) Section RA 23(2) heading: repealed (with effect on 1 April 2008), on 6 October 2009, pursuant to section 495(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 23(2): repealed (with effect on 1 April 2008), on 6 October 2009, by section 495(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RA 23(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 495(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RA 23 list of deﬁned terms employer’s superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 495(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
RA 24 Application of other provisions for purposes of RSCT rules For the purposes of the RSCT rules, sections 170(2), 171, and 172 of the Tax Administration Act 1994, modiﬁed as neces- sary, apply as if— (a) a reference to an amount of tax withheld were a refer- ence to RSCT: a reference to the RWT rules were a reference to the RSCT rules.
(b) Deﬁned in this Act: amount of tax, RSCT rules, RWT rules Compare: 2004 No 35 s NEB 7(1) Section RA 24: added, on 1 April 2008, by section 526 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

2215 Part R s RB 1 Income Tax Act 2007 Reprinted as at 1 January 2010 Subpart RB—Terminal tax RB 1 Payment of terminal tax A person must pay their terminal tax for a tax year on the due date set out in section RA 13 (Payment dates for terminal tax).
Deﬁned in this Act: pay, tax year, terminal tax Compare: 2004 No 35 s MC 1 Section RB 1: amended (with effect on 1 April 2008), on 6 October 2009, by section 496(1) of the Taxation (International Taxation, Life Insurance, and Re- medial Matters) Act 2009 (2009 No 34).
RB 2 Income tax liability for non-ﬁling taxpayers for non-resident passive income For the purposes of calculating a person’s terminal tax under section BC 8 (Satisfaction of income tax liability), the income tax liability of a non-ﬁling taxpayer who derives non-resident passive income is determined under section BC 1 (Non-ﬁling and ﬁling taxpayers).
Deﬁned in this Act: income tax liability, non-ﬁling taxpayer, non-resident pas- sive income, terminal tax Compare: 2004 No 35 s BC 1 RB 3 Schedular income tax liability for ﬁling taxpayers for non-resident passive income When this section applies This section applies for the purposes of calculating a ﬁling taxpayer’s terminal tax under section BC 8 (Satisfaction of income tax liability).
Calculating amount of liability The schedular income tax liability of the ﬁling taxpayer under section BC 7 (Income tax liability of person with schedular income) for each class of non-resident passive income that is schedular income under paragraph (f) of the deﬁnition of schedular income is equal to an amount calculated using the formula— amount of income × tax rate.
(1) (2) 2216 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 1 (3) (4) Deﬁnition of item in formula In the formula, tax rate is the rate set out in sections RF 7 to RF 10, and RF 12 (which relate to the calculation of NRWT) that applies to the class of non-resident passive income.
No imputation credits If the taxpayer derives a dividend to which subsection (2) ap- plies, they do not have a credit under section LE 1 (Tax credits for imputation credits) for an imputation credit attached to the dividend.
Deﬁned in this Act: amount, dividend, ﬁling taxpayer, imputation credit, non-ﬁling taxpayer, non-resident passive income, NRWT, schedular income, schedular income tax liability, terminal tax Compare: 2004 No 35 ss BC 7, NG 3 Section RB 3(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 497(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
RB 4 Using refunds to satisfy tax liabilities If a person is entitled to a refund of an amount of tax from the Commissioner, the amount may be applied under section RM 10 (Using refund to satisfy tax liability) to satisfy a liability that the person has under the Inland Revenue Acts.
Deﬁned in this Act: amount of tax, Commissioner, Inland Revenue Acts Compare: 2004 No 35 s MD 1(3), (3A) Subpart RC—Provisional tax Introductory provisions RC 1 What this subpart does (1) When this subpart applies Sections RC 3 to RC 39 apply, for the purposes of the provi- sional tax rules, to provide— (a) the circumstances in which a person has a provisional tax obligation: a person’s provisional tax liability for a tax year, and the methods for calculating the amount payable for the tax year: the number of instalments of provisional tax and the instalment dates for a corresponding income year: (b) (c) 2217 Part R s RC 2 Income Tax Act 2007 Reprinted as at 1 January 2010 (d) (e) (f) how the amount of an instalment of provisional tax is determined: the payment of provisional tax in a transitional year: the application of the rules relating to use of money interest in Part 7 of the Tax Administration Act 1994, and late payment penalties and shortfall penalties in Part 9 of that Act.
Instalment dates In this subpart, a reference to an instalment classiﬁed by the letters A to F is a reference to a date in the table in schedule 3, part A (Payment of provisional tax and terminal tax) on which an instalment of provisional tax is payable for an income year corresponding to a tax year.
Deﬁned in this Act: amount, corresponding income year, income year, instal- ment date, pay, provisional tax, provisional tax rules, shortfall penalty, tax year, transitional year Compare: 2004 No 35 s MB 1 (2) RC 2 Provisional tax rules and their application (1) (2) Meaning The provisional tax rules means— (a) (b) this subpart; and section LB 2 (Tax credits for provisional tax payments); and sections 15N to 15S, 119, 120KB to 120N, 120OE, 139B and 139C, 173P to 173R of the Tax Administra- tion Act 1994.
(c) Application The provisional tax rules apply to a person who is required or who chooses to pay provisional tax.

Deﬁned in this Act: provisional tax, provisional tax rules Compare: 2004 No 35 s OB 1 provisional tax rules RC 3 Who is required to pay provisional tax?
Threshold or election A person who is liable to pay provisional tax for a tax year is— a person whose residual income tax for the tax year is (a) more than $2,500; or (1) 2218 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 4 (b) a person who chooses under section RC 4 to pay provi- sional tax.
(2) (3) Exclusions Despite subsection (1), the following persons do not pay pro- visional tax: (a) a company that does not have a ﬁxed establishment in New Zealand and is not treated as resident in New Zealand: a person referred to in section 33A(1) of the Tax Administration Act 1994: a non-resident contractor who has not been given an exemption certiﬁcate by the Commissioner for the tax year: a portfolio tax rate entity that does not make an election under section HL 23 (Payments of tax by portfolio tax rate entity choosing to pay provisional tax).
(b) (c) (d) No obligation A person has no obligation to pay provisional tax for a tax year if their residual income tax for the preceding tax year is $2,500 or less.
Deﬁned in this Act: Commissioner, company, exemption certiﬁcate, ﬁxed es- tablishment, New Zealand, non-resident, non-resident contractor, pay, portfolio tax rate entity, provisional tax, resident in New Zealand, residual income tax, tax year Compare: 2004 No 35 ss MB 2, OB 1 provisional taxpayer RC 4 Choosing to pay provisional tax (1) Election A person, when ﬁrst providing a return of income for a tax year, may choose to pay provisional tax for the tax year if— (a) they have paid provisional tax of more than $2,500 on or before— (i) the date of instalment F for the corresponding income year; or (ii) the ﬁnal instalment date in a transitional year; and they have, on the day on which the ﬁrst payment of provisional tax is made for the tax year, a reasonable expectation that they are liable to pay provisional tax for the tax year, other than by this election.
(b) 2219 Part R s RC 5 Income Tax Act 2007 Reprinted as at 1 January 2010 (2) Exclusion This section does not apply to a person described in section RC 3(2).
Deﬁned in this Act: corresponding income year, ﬁnal instalment, instalment date, pay, provisional tax, return of income, tax year, transitional year Compare: 2004 No 35 s MB 3 Calculating provisional tax liability RC 5 Methods for calculating provisional tax liability Choice of method A person liable to pay provisional tax must calculate the amount payable for a tax year using 1 of the methods de- scribed in subsections (2) to (7).
Standard method: 5% uplift Under the standard method, the amount of provisional tax payable for the tax year is 105% of the person’s residual in- come tax for the preceding tax year, determined under section RC 6.

Subsection (3) overrides this subsection.
Standard method: 10% uplift Despite subsection (2), the amount of provisional tax payable for the tax year is 110% of the person’s residual income tax for the tax year before the preceding tax year if— (a) they are required to provide a return of income for the preceding tax year; and the return is not due on or before the date on which the ﬁrst payment of provisional tax for the tax year is required through the application of section 37 of the Tax Administration Act 1994, or an extension granted under that section; and they have not provided the return on or before that date; and the date is not the date of instalment F for the corres- ponding income year.
(b) (c) (d) Relationships and modiﬁcation of standard method Subsections (5) to (7) override subsection (3).

Sections RZ 3 and RZ 5B (which relate to tax rate changes) modify subsec- tions (2) and (3).

(1) (2) (3) (4) 2220 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 6 (5) (6) (7) (8) Estimation method The person may estimate their provisional tax liability for the tax year under section RC 7.
GST ratio method A person who is eligible under section RC 16 and not excluded by section RC 17 may choose to use a goods and services tax (GST) ratio under section RC 8 to determine their provisional tax liability for the tax year.
Commissioner’s determination If the Commissioner determines a person’s provisional tax li- ability under section 119 of the Tax Administration Act 1994, the amount or liability is that last determined by the Commis- sioner and notiﬁed to the person at least 30 days before the instalment date.

The 30-day requirement does not apply in a case to which section 119(1)(d) of that Act applies (which re- lates to an estimate of residual income tax that is not fair and reasonable).
Life insurance business A person who carries on a business of providing life insurance and who is liable for income tax under the life insurance rules, must at the time they determine their provisional tax liability provide the Commissioner with details of the calculation of that liability.

In particular, they must detail the extent to which the amount of provisional tax relates to the policyholder base.
Deﬁned in this Act: amount, business, Commissioner, corresponding income year, GST ratio, income tax, instalment date, life insurance, life insurance rules, notify, pay, policyholder base, provisional tax, residual income tax, return of income, tax year Compare: 2004 No 35 s MB 4 Section RC 5(4): amended, on 1 October 2008, by section 39 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
RC 6 Standard method (1) When this section applies This section applies to a person liable to pay provisional tax for the purposes of section RC 5(2) and (3) and the calculation of the amount of provisional tax payable for a tax year under the standard method.
2221 Part R s RC 6 Income Tax Act 2007 Reprinted as at 1 January 2010 Assessment for preceding tax year The person’s residual income tax for a tax year is based on their assessment for the preceding tax year unless the Com- missioner has sent out a notice of assessment for the tax year at least 30 days before the relevant instalment date, in which case the amount of residual income tax is based on the Com- missioner’s assessment for the preceding tax year.
Commissioner’s assessment for preceding tax year The person’s residual income tax is based on the Commis- sioner’s assessment for the preceding tax year, whenever the assessment is made, if— (a) they are required under sections 33 and 37 of the Tax Administration Act 1994 to provide a return of income for the preceding tax year but have failed to do so by the relevant instalment date; or they are not required under sections 33 and 37 of that Act to provide a return by the relevant instalment date, and subsections (2) and (4) do not apply.
(b) Residual income tax for preceding tax year The amount of provisional tax payable for a tax year is the amount of the person’s residual income tax for the preceding tax year if— (a) they are not required to provide a return of income for the preceding tax year; or their residual income tax for the tax year before the pre- ceding tax year was $2,500 or less, and they were not required to provide, and have not provided, a return of income for the tax year by the date of instalment F for the corresponding income year.
(b) Later increased assessment If the Commissioner’s assessment of a person’s income tax li- ability occurs after the payment date for an instalment of pro- visional tax and would result in an increase in the person’s residual income tax for the preceding tax year, the residual in- come tax is treated for the purposes of the provisional tax rules as if it had not been increased.
(2) (3) (4) (5) 2222 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 7 (6) Transitional years and consolidated groups A person’s residual income tax in a transitional year is calcu- lated under section RC 20.

For consolidated groups, the cal- culation is made under section RC 29.
Deﬁned in this Act: amount, assessment, Commissioner, consolidated group, corresponding income year, income tax liability, instalment date, notice, pay, provisional tax, provisional tax rules, residual income tax, return of income, tax year, transitional year Compare: 2004 No 35 s MB 5 RC 7 Estimation method (1) (2) (3) (4) (5) (6) When this section applies This section applies to a person who is liable to pay provisional tax under section RC 5(5) and to the calculation of the amount of their provisional tax payable for a tax year under the esti- mation method.
Fair and reasonable estimate On or before an instalment date, the person may make a fair and reasonable estimate of their residual income tax for the tax year by informing the Commissioner of the estimate.

The amount of provisional tax payable for a tax year is the amount of the estimated residual income tax.

Revising estimates The person may choose to revise an estimate made under sub- section (2) before an instalment date.
The amount last esti- mated is the amount taken into account under section RC 5(5).

Reasonable care in making and maintaining assessment A person who makes an estimate under subsection (2) must take reasonable care in making it, and must revise the estimate for the tax year if, at some time in the tax year, the amount estimated is no longer fair and reasonable.
Estimation higher than provisional tax payable If a person’s estimate is more than the provisional tax that is payable for the tax year, they are treated as having taken rea- sonable care in making the estimate.
Changing calculation method from GST ratio If, under section RC 18(5), a person changes the way they determine the amount of provisional tax after the date of an 2223 Part R s RC 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (7) instalment, they must estimate their residual income tax for their corresponding income year, and must pay provisional tax on whichever of the following instalment dates for the income year occur after 30 days from their last ratio instalment date: C and F for changes to a 6-monthly GST taxable period: (a) B, D, and F for other changes.
(b) Disaster relief [Repealed] [Repealed] Deﬁned in this Act: amount, Commissioner, corresponding income year, GST ratio, instalment date, pay, provisional tax, ratio instalment date, residual in- come tax, tax year Compare: 2004 No 35 s MB 6 Section RC 7(6): substituted, on 1 April 2008, by section 527 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section RC 7(7) heading: repealed, on 6 October 2009, pursuant to section 499(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RC 7(7): repealed, on 6 October 2009, by section 499(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RC 7 list of deﬁned terms qualifying event: repealed, on 6 October 2009, by section 499(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RC 7 list of deﬁned terms self-assessed adverse event: repealed, on 6 October 2009, by section 499(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
RC 8 GST ratio method Using GST ratio A person liable to pay provisional tax who meets the require- ments of section RC 16 and is not excluded by section RC 17 may choose to use a GST ratio to determine the amount of pro- visional tax payable for a tax year.

Meaning of GST ratio The person’s GST ratio is the percentage ﬁgure that is ob- tained by dividing their residual income tax for the preced- ing tax year by their total taxable supplies for the correspond- ing income year.
The amount of residual income tax and the amount of total taxable supplies are called base amounts for the purposes of this section.
(1) (2) 2224 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 8 (3) When amounts based on tax year before preceding tax year If a base amount for the preceding tax year or corresponding income year is not known, the GST ratio is the percentage based on the assessment for the tax year and corresponding income year that are just before the preceding tax year and corresponding income year.
When no assessment for tax year before preceding tax year (3B) Subsection (3) does not apply and the GST ratio is the percent- age based on the assessments of the base amounts for the year that is 2 years before the preceding tax year if— (a) for the year before the preceding tax year— (i) (ii) an assessment of a base amount has not been made and the absence of an assessment arises be- cause of an extension of time for ﬁling a return for the year, or a period in the year: an assessment of a base amount is the subject of a dispute or challenge under the Tax Administra- tion Act 1994: the year is a transitional year; and (iii) for the year that is 2 years before the preceding tax year— (i) (ii) the base amounts have been assessed; and the circumstances in paragraph (a)(ii) and (iii) do not exist.
(b) (4) (5) Commissioner’s calculation The Commissioner must calculate a person’s GST ratio, in- forming them by— (a) including the percentage ﬁgure on the person’s preprinted GST return form; or advising them in writing or by telephone; or some other means.
(b) (c) Adjustment to GST ratio The Commissioner must adjust a person’s GST ratio if a base amount is revised through, among other reasons,— (a) an assessment or an amended assessment of the person’s income tax return for the preceding tax year; or a change in the value of the total taxable supplies for the corresponding income year; or (b) 2225 Part R s RC 8 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) the disposal of an asset to which section RC 19 applies.
New GST ratio (6) When subsection (5) applies, the Commissioner must inform the person of the new GST ratio.

The new ratio applies in relation to the relevant instalment dates that occur 30 days after the date on which the person is informed.
(7) Transitional years If a person has paid instalments of provisional tax in a transi- tional year, for the tax year that follows the transitional year, for the purposes of this section and section RC 11, they must— ignore the transitional year when determining their re- (a) sidual income tax or total taxable supplies; and base their determination of residual income tax and total taxable supplies on the tax year preceding the transi- tional year.
(b) When no assessment for tax year before preceding tax year (7B) Subsection (7) does not apply and the GST ratio is the percent- age based on the assessments of the base amounts for the year that is 2 years before the transitional year if— (a) for the year before the transitional year— (i) (ii) an assessment of a base amount has not been made and the absence of an assessment arises be- cause of an extension of time for ﬁling a return for the year, or a period in the year: an assessment of a base amount is the subject of a dispute or challenge under the Tax Administra- tion Act 1994: the year is a transitional year; and (iii) for the year that is 2 years before the transitional year— the base amounts have been assessed; and (i) the circumstances in paragraph (a)(ii) and (iii) do (ii) not exist.
(b) Total taxable supplies In subsections (2), (5), and (7), and in sections RC 11, RC 19, and RC 31, total taxable supplies, for a person and a period, means the amount that is the total value of taxable supplies by the person for the period.

The amount includes the GST charged on the supplies.

(8) 2226 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 9 (9) Modiﬁcation Sections RZ 4 and RZ 5C (which relate to tax rate changes) modify this section.
Deﬁned in this Act: amount, assessment, base amount, Commissioner, corres- ponding income year, GST, GST ratio, income tax, instalment date, pay, pro- visional tax, residual income tax, return, tax year, taxable supply, total taxable supplies, transitional year Compare: 2004 No 35 s MB 7 Section RC 8(3B) heading: inserted, on 1 April 2008, by section 528(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section RC 8(3B): inserted, on 1 April 2008, by section 528(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RC 8(7B) heading: inserted, on 1 April 2008, by section 528(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RC 8(7B): inserted, on 1 April 2008, by section 528(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section RC 8(9): amended, on 1 October 2008, by section 40 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Instalments of provisional tax RC 9 Provisional tax payable in instalments (1) (2) (3) Who this section applies to This section applies to a person who is liable to pay provisional tax.
General principle For a person liable to pay provisional tax using the standard and estimation methods, the amount of the provisional tax li- ability must be spread evenly over the applicable number of instalments, so that equal amounts are paid on each instalment date.

If the full amount is not divisible into exactly equal in- stalments, the ﬁnal instalment carries the difference.
Provisional tax payable in 3 instalments A person pays provisional tax in 3 instalments on the interest instalment dates for the tax year in the months set out in sched- ule 3, part A, columns B, D, and F (Payment of provisional tax and terminal tax) for the person’s corresponding income year.

The amount of each instalment is calculated under section RC 10.

Subsection (4) overrides this subsection.
2227 Part R s RC 9 Income Tax Act 2007 Reprinted as at 1 January 2010 Exclusions Subsection (3) does not apply— (a) to a person liable to pay provisional tax who— pays GST on a 6-monthly basis; or (i) uses a GST ratio to determine the amount of pro- (ii) visional tax payable, or who changes their calcu- lation method under section RC 18(5); or changes the cycle of their taxable periods under section 15C of the Goods and Services Tax Act 1985: (iii) (b) (c) (d) to a person with an initial provisional tax liability who— (i) (ii) pays GST on a 6-monthly basis; or pays GST on a monthly or 2-monthly basis, and starts a taxable activity within 30 days before the date of instalment B in their corresponding in- come year: to a person liable to pay provisional tax who has not provided a return of income for the preceding tax year, and whose residual income tax for the tax year before the preceding tax year was $2,500 or less: in a transitional year.
Provisional tax when GST paid on 6-monthly basis A person liable to pay provisional tax who pays GST on a 6-monthly basis must pay provisional tax on the 2 interest in- stalment dates for the tax year in the months set out in sched- ule 3, part A, columns C and F for their corresponding income year.
This subsection applies to a person with an initial provi- sional tax liability other than 1 who pays GST on a 6-monthly basis and starts a taxable activity within 30 days before the date of instalment C. Provisional tax determined using GST ratio A person liable to pay provisional tax who uses a GST ratio to determine the amount of provisional tax payable for a tax year, must pay provisional tax on the 6 ratio instalment dates in the months set out in schedule 3, part A, columns A to F for their corresponding income year.
The amount of each instalment is calculated under section RC 11.

(4) (5) (6) 2228 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 9 (7) (8) (9) Changing calculation method A person who is unable or who decides not to use a GST ratio, changing their calculation method under section RC 18, must pay the provisional tax payable for the tax year on the relevant instalment dates under the replacement method.

The amount of each instalment is calculated under section RC 10.
Changing cycle of taxable periods A person who changes the cycle of their taxable periods under section 15C of the Goods and Services Tax Act 1985 must pay provisional tax for the tax year on the instalment dates set out in section RC 27 after the change in taxable period takes effect.

The amount of each instalment is calculated under section RC 10.
Persons with initial provisional tax liability A person with a new provisional tax liability who starts a tax- able activity in a tax year is liable to pay interest calculated under section 120KC of the Tax Administration Act 1994 as if they were liable to pay provisional tax for the tax year— (a) in 3 instalments under subsection (3) if they start a tax- able activity at some time in the period that starts at the beginning of the corresponding income year and ends 30 days before the date of instalment B: in 2 instalments— (i) (ii) in a case to which section RC 13 applies; or if they pay GST on a 6-monthly basis and start a taxable activity at some time in the period that starts at the beginning of the corresponding in- come year and ends 30 days before the date of instalment C: (b) (c) in 1 instalment in a case to which section RC 14 applies.
Extension of time for return (10) A person who has not provided a return of income for a pre- ceding tax year and whose residual income tax for the tax year before the preceding tax year was $2,500 or less must pay pro- visional tax for the tax year on the instalment dates set out in section RC 13 or RC 14, as applicable.
2229 Part R s RC 10 Income Tax Act 2007 Reprinted as at 1 January 2010 (11) Transitional years In a transitional year, provisional tax is payable as set out in section RC 21 and schedule 3, part B.

The amount of each instalment is calculated under sections RC 22 to RC 24.

Voluntary payments (12) A person liable to pay provisional tax may pay an instalment under section RC 12 at any time.
Deﬁned in this Act: amount, corresponding income year, ﬁnal instalment, GST, GST ratio, initial provisional tax liability, instalment date, interest instalment date, pay, provisional tax, ratio instalment date, residual income tax, return of income, tax year, taxable activity, taxable period, transitional year Compare: 2004 No 35 s MB 8 Section RC 9(7): amended, on 1 April 2008, by section 529(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section RC 9(9): amended, on 1 April 2008, by section 529(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RC 9(9)(b)(ii): substituted, on 1 April 2008, by section 529(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
RC 10 Calculating amount of instalment under standard and estimation methods (1) When this section applies This section applies for the purposes of— (a) section RC 5(2), (3), and (5) (which relates to the cal- culation of a provisional tax liability); and section RC 9(3) and (5) (which relates to payment of instalments); and sections RC 13 and RC 14 (which relate to persons with an initial provisional tax liability and those with an extension of time for providing a return); and sections RC 26 and RC 27 (which relate to changes in taxable periods).
(b) (c) (d) (2) Calculation The amount of an instalment of provisional tax is calculated using the formula— 2230 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 10 (3) (4) Deﬁnition of items in formula In the formula,— (a) (ii) residual income tax is a person’s residual income tax, as applicable— (i) for the preceding tax year, uplifted by 5% (modi- ﬁed as applicable by sections RZ 5 and RZ 5B (which relate to tax rate changes); or for the tax year before the preceding tax year, up- lifted by 10% (modiﬁed as applicable by sections RZ 5 and RZ 5B); or the amount estimated by them: (iii) instalment number is the number of the instalment for the tax year, whether ﬁrst, second, or third: total instalments is the total number of instalments for the tax year: provisional tax is the amount of a person’s provisional tax liabilities for the tax year to date.
(b) (c) (d) Instalment amounts after change in balance date or taxable period If a change occurs to the balance date or cycle of a person’s taxable periods, the calculation of the amount of an instalment is made under this section, applying the updated ﬁgures to the items in the formula.
Deﬁned in this Act: amount, balance date, initial provisional tax liability, pay, provisional tax, residual income tax, return of income, tax year, taxable period Compare: 2004 No 35 s MB 9 Table R1—Summary of Instalment dates and calculation methods for provisional tax Cat- egor- ies Vari- ables Method In- stal- ments RC 6 3: RC 9(3) Stand- ard RC 5(2), (3) In- stal- ment dates B, D, F Cal- cula- tion In- terest penal- ties RC 10 120KE(1), (2) 2231 Part R s RC 10 Income Tax Act 2007 Reprinted as at 1 January 2010 Table R1—continued Vari- ables Method In- stal- ments RC 7 3: RC 9(3) Cal- cula- tion In- terest penal- ties RC 10 120KB In- stal- ment dates B, D, F 1 month RC 8 6: RC 9(6) A to F RC 11 120KE(3), 139C 2 month stand- ard RC 8 RC 6 6: RC 9(6) A to F RC 11 120KE(3), 139C 2: RC 9(5) C and F RC 11 120KE(1) RC 7 2: RC 9(5) C and F RC 11 120KB esti- ma- tion Cat- egor- ies Esti- ma- tion RC 5(5) GST Ratio RC 5(6) GST 6-month RC 9(4) Cat- egor- ies: ex- cep- tional 2232 Reprinted as at 1 January 2010 Table R1—continued Income Tax Act 2007 Part R s RC 10 Cat- egor- ies Vari- ables Method In- stal- ments RC 6 or RC 7 RC 9(9), RC 13(3), RC 14(2) RC 20 RC 22 (RC 9(11)) RC 27 (RC 9(8)) RC 27, 15C, 15E (GST Act) Per- sons with initial provi- sional tax li- ability Tran- si- tional years Chang- ing tax- able period, or start- ing and stop- ping Gst regis- tration In- stal- ment dates D and F, or F as re- quired Cal- cula- tion In- terest penal- ties 120KC RC 10 (RC 13(4)), RC 10 (RC14(3)) 120KC 120KD RC 22 – RC 24
 RC 26, RC27 B, D, F, or C, F as re- quired B, D, F, or C, F as re- quired 2233 Part R s RC 11 Income Tax Act 2007 Reprinted as at 1 January 2010 Table R1—continued Cat- egor- ies Vari- ables Method In- stal- ments Cal- cula- tion In- terest penal- ties RC 18 120KE(5)–(7) In- stal- ment dates B, D, F, or C, F as re- quired RC 18 RC 7(6), RC 9(7) RC 12 120E Chang- ing calcu- lation method Vol- untary pay- ments Section RC 10(1)(b): amended, on 1 April 2008, by section 530 of the Taxation (Business Taxation
 and Remedial Matters) Act 2007 (2007 No 109).
Section RC 10(3)(a)(i): amended, on 1 October 2008, by section 41(a) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section RC 10(3)(a)(ii): amended, on 1 October 2008, by section 41(b) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
RC 11 Calculating amount of instalment using GST ratio Calculation For a person who uses a GST ratio, the amount of provisional tax payable on an instalment date for a tax year is calculated using the formula— GST ratio for tax year × total taxable supplies.

Deﬁnition of item in formula In the formula, total taxable supplies is the amount of the per- son’s total taxable supplies in the taxable period that matches the instalment period.
Taxable supplies when person pays on monthly basis For the purposes of subsection (1), a person who pays GST on a 1-month cycle under section 15 of the Goods and Services (1) (2) (3) 2234 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 13 (4) Tax Act 1985 must apply the GST ratio to the sum of their taxable supplies in the current taxable period and the preced- ing taxable period, that is, the taxable supplies in the 2-month period matching the instalment period.
Modiﬁcation Sections RZ 4 and RZ 5C (which relate to tax rate changes) modify this section.

Deﬁned in this Act: amount, GST, GST ratio, instalment date, pay, provisional tax, tax year, taxable period, taxable supply, total taxable supplies Compare: 2004 No 35 s MB 10 Section RC 11(4): amended, on 1 October 2008, by section 42 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
RC 12 Voluntary payments A person who is liable to pay provisional tax may at any time make a voluntary payment of an amount of provisional tax that— (a) relates to their income tax liability for a tax year in which they are not liable for provisional tax; or is more than the provisional tax payable by them for the tax year; or is more than the income tax payable by them for the tax year.
(b) (c) Deﬁned in this Act: amount, income tax, income tax liability, pay, provisional tax, tax year Compare: 2004 No 35 s MB 12 RC 13 Paying 2 instalments for tax year (1) Who this section applies to This section applies for a tax year to— (a) a person with an initial provisional tax liability whose ﬁrst business day occurs in the period that starts 30 days before the date of instalment B and ends 30 days before the date of instalment D; or a person liable to pay provisional tax whose return of income for the preceding tax year is provided in the period that starts on the date of instalment B and ends on the date of instalment D if— (b) 2235 Part R s RC 14 Income Tax Act 2007 Reprinted as at 1 January 2010 (i) (ii) they were required to provide a return for the pre- ceding tax year but, under section 37 of the Tax Administration Act 1994 or an extension under that section, are not required to provide the re- turn by the date of instalment B; and their residual income tax for the tax year before the preceding tax year was $2,500 or less.
(2) (3) (4) Exclusion Despite subsection (1), this section does not apply to a person liable to pay provisional tax who pays GST on a 6-monthly basis.

When instalments are payable For the purposes of section RC 9(9)(b), the instalments are payable on the date of instalments D and F for the person’s corresponding income year.

Formula for amount of instalment The amount of each instalment is calculated under section RC 10.
Deﬁned in this Act: amount, corresponding income year, ﬁrst business day, GST, initial provisional tax liability, pay, provisional tax, residual income tax, return of income, tax year Compare: 2004 No 35 s MB 13 RC 14 Paying 1 instalment for tax year Who this section applies to This section applies for a tax year to— (a) (b) a person with an initial provisional tax liability whose ﬁrst business day occurs in the period that starts 30 days before the date of instalment D and ends at the end of the corresponding income year: a person liable to pay provisional tax whose return of income for the preceding tax year is not provided on or before the date of instalment D if— (i) they were required to provide a return for the pre- ceding tax year but, under section 37 of the Tax Administration Act 1994 or an extension under that section, are not required to provide the re- turn by the date of instalment D; and (1) 2236 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 16 (ii) their residual income tax for the tax year before the preceding tax year was $2,500 or less: (c) a person who pays GST on a 6-monthly basis if— (i) their ﬁrst business day occurs in the period that starts 30 days before the date of instalment C and ends at the end of the corresponding income year; or they meet the requirements of paragraph (b)(i) and (ii) as if the reference to instalment D in para- graph (b)(i) were a reference to instalment C. (ii) (2) (3) When instalment payable For the purposes of section RC 9(9)(c), the instalment is payable on the date of instalment F for the person’s corres- ponding income year.
Amount of instalment The amount of the instalment is calculated under section RC 10.
Deﬁned in this Act: amount, corresponding income year, ﬁrst business day, GST, initial provisional tax liability, pay, provisional tax, residual income tax, return of income, tax year Compare: 2004 No 35 s MB 14 Requirements for using GST ratio RC 15 Choosing to use GST ratio A person who meets the requirements of section RC 16(2) and (3) for a tax year may choose to use a GST ratio for the corres- ponding income year if they inform the Commissioner of their election before the start of the income year.
Deﬁned in this Act: Commissioner, corresponding income year, GST ratio, tax year Compare: 2004 No 35 s MB 16 RC 16 Who may use GST ratio?

(1) General eligibility A person liable to pay provisional tax may choose to use a GST ratio to determine under section RC 5(6) the amount of provisional tax payable for a tax year only if they meet all the 2237 Part R s RC 16 Income Tax Act 2007 Reprinted as at 1 January 2010 requirements of subsections (2) and (3) in relation to the same entity.
Requirements for preceding tax year For the purposes of determining their eligibility for a tax year, the person must meet the following requirements in the pre- ceding tax year and corresponding income year:: (a) their residual income tax, as calculated, was more than $2,500 but no more than $150,000; and they were a registered person for the whole income year, and provided a return under the Goods and Services Tax Act 1985 for an entity whose taxable activity did not begin operations in that tax year; and the ratio of their residual income tax to total taxable sup- plies, as calculated under section RC 11 and expressed as a percentage, is between zero and 100%.
(b) (c) Requirement for current year For the tax year in which the person uses a GST ratio, they must be liable to ﬁle a return under the Goods and Services Tax Act 1985 for a 2-month or a 1-month period under section 15(1)(b) and (c) of that Act.

When election applies A person’s election under section RC 15 to use a GST ratio applies for the tax year for which the election is made and in later tax years, unless the person changes their calculation method under RC 18.
References to preceding tax year In this section, a reference to a preceding tax year includes a reference to a tax year earlier than the preceding tax year if that earlier tax year is used for the purposes of calculating a GST ratio.
Deﬁned in this Act: amount, GST ratio, pay, provisional tax, registered person, residual income tax, tax year, taxable activity, total taxable supplies Compare: 2004 No 35 s MB 15(1)–(4), (11) Section RC 16(2): amended, on 1 April 2008, by section 531(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RC 16(2)(b): amended, on 1 April 2008, by section 531(2) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section RC 16(5): amended, on 1 April 2008, by section 531(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
(2) (3) (4) (5) 2238 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 17 RC 17 When GST ratio must not be used (1) (2) (3) (4) Requirement to discontinue use of GST ratio Despite section RC 16, a person must stop using a GST ratio for a tax year and must apply section RC 18(4) or (5) if— (a) their GST registration ends under section 52 of the Goods and Services Tax Act 1985 in the tax year; or they no longer qualify under section RC 16(2) as a result of an amended assessment of their income tax liability or their GST liability for the preceding tax year; or they no longer qualify under section RC 16(3) as a result of a change in their taxable period.
(b) (c) No GST return A person must not use, or must stop using, a GST ratio for a tax year if they— (a) are liable to provide a return under the Goods and Services Tax Act 1985 for a period in their correspond- ing income year; and do not ﬁle the return within 60 days after the due date for ﬁling the return.
(b) Instalments following default A person who is required by subsection (2) to stop using a GST ratio must pay the provisional tax instalments required under section RC 18 for an instalment period beginning on or after the due date for ﬁling the return referred to in subsection (2) that is not the subject of notiﬁcation under subsection (4).
Further use of GST ratio Despite subsections (2) and (3), a person may use a GST ratio for an instalment period referred to in subsection (3) if— (a) they apply in writing or by telephone to the Commis- sioner; and the Commissioner considers— (i) (b) the failure to ﬁle the return is caused by an event or circumstance beyond the person’s control; and the event or circumstance provides reasonable justiﬁcation or excuse for the failure; and the person remedied the failure as soon as prac- ticable; and (ii) (iii) 2239 Part R s RC 18 Income Tax Act 2007 Reprinted as at 1 January 2010 (5) (6) (c) the Commissioner notiﬁes the person that they may use the GST ratio for the instalment period.
Standard required For the purposes of subsection (4)(b), the Commissioner must use the same approach that would be used to justify the remis- sion of a penalty under section 183A of the Tax Administration Act 1994.
Later default Notiﬁcation under subsection (4) does not apply to an instal- ment period if— (a) the person fails to ﬁle a return due after the date of the notice unless the failure is anticipated and referred to in the notice; and the instalment period begins on or after the due date of the return described in paragraph (a).
(b) Deﬁned in this Act: assessment, Commissioner, corresponding income year, GST ratio, income tax liability, notify, pay, provisional tax, tax year, taxable period Compare: 2004 No 35 s MB 15(5)–(10) Section RC 17(4)(a): amended, on 1 April 2008, by section 532 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
RC 18 Changing calculation method When this section applies This section applies if, after having chosen to use a GST ratio for a tax year, a person liable to pay provisional tax either— (a) chooses another way to calculate the amount of provi- sional tax payable for the tax year; or is required under section RC 17(1) or (2) to stop using a GST ratio for the corresponding income year.
(b) Informing Commissioner of decision to change The person must inform the Commissioner of their decision under subsection (1)(a), and may do this either in writing or by telephone.

Subsection (4) or (5) then applies for the remaining instalments of provisional tax for the tax year.
Date on which use of GST ratio stopped For the purposes of subsection (1)(b), the date on which the person stops using a GST ratio is, as applicable,— (1) (2) (3) 2240 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 18 (4) (5) (6) (7) (a) (b) (c) (d) the date their GST registration ends; or the date of the amended assessment of their income tax liability or GST liability for the preceding tax year; or the effective date of a change in taxable period; or the last day of the period in which a return is liable to be provided under the Goods and Services Tax Act 1985.
Changing method before date of instalment A If the person is unable or decides not to use a GST ratio before the date of instalment A, they may choose to determine the amount of provisional tax payable under section RC 5(2), (3) or (5).

The person is treated as never having chosen to use the GST ratio method and, for the purposes of section 120KE(5) of the Tax Administration Act 1994, as never having changed the way they determine an amount of provisional tax under this section.
Changing method after instalment date If the person is unable or decides not to use the GST ratio after an instalment date, they must determine the amount of provi- sional tax payable on instalment for the remainder of the in- come year under section RC 5(5) using the estimation method.

For this purpose, the person may provide the estimate in writ- ing or by telephone.
Date of application when method changed If the person changes their calculation method under subsec- tion (4) or (5), the date on which the change applies may be a future date agreed between the person and the Commissioner.
Other consequences of changing method For the purposes of this section,— (a) (ii) the number of instalments and the instalment dates re- maining for an income year depend on— (i) the requirements of the method chosen by the person when they stop using the GST ratio; and the cycle of taxable periods chosen by the person, being either a monthly or 2-monthly basis: a person may change from using a GST ratio to a 6-monthly cycle of taxable periods only if— (i) the requirements of section 15C of the Goods and Services Tax Act 1985 are met; and (b) 2241 Part R s RC 19 Income Tax Act 2007 Reprinted as at 1 January 2010 (c) (ii) their 6-month taxable period is aligned with their balance date under section 15B of the Goods and Services Tax Act 1985: section 120KE(5) to (7) of the Tax Administration Act 1994 applies in deciding whether use of money inter- est is payable in relation to instalments under the new method.
Deﬁned in this Act: amount, assessment, balance date, Commissioner, corres- ponding income year, GST ratio, income tax liability, income year, instalment date, pay, provisional tax, tax year, taxable period Compare: 2004 No 35 s MB 17 Section RC 18(2): amended, on 1 April 2008, by section 533(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section RC 18(4): amended, on 1 April 2008, by section 533(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
RC 19 Disposal of assets (1) (2) When this section applies This section applies if, as part of the taxable activity of an entity referred to in section RC 16(2) and (3), a person who is liable to pay provisional tax, disposes of an asset— that is not revenue account property; and (a) the value of the supply of which is not less than the (b) greater of— (i) an amount equal to 5% of the total taxable sup- plies of the business for the previous 12 months; or $1,000.
(ii) Adjustment to GST ratio for current and next income year The person may choose to take the disposal of the asset into account in adjusting their taxable supplies for the relevant tax- able period and income year, by subtracting the value, includ- ing GST, of the asset from— (a) the total taxable supplies for a taxable period for the pur- poses of the formula in section RC 11(1), in proportion to the output tax which is attributed under section 20(4) of that Act to that taxable period for the supply of the asset: the base amount of total taxable supplies for the corres- ponding income year under section RC 8(2), in propor- (b) 2242 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 20 (3) (4) tion to the output tax which is attributed under section 20(4) of that Act to a taxable period in that income year for the supply of the asset.
Informing Commissioner For the purposes of subsection (2), the person must inform the Commissioner of both the disposal of the asset and the value of its supply, and may do this either in writing or by telephone.

Rounding percentages In the determination of the value of the supply of the asset under subsection (1)(b)(i), the amount must be rounded to a whole percentage number.
Deﬁned in this Act: amount, base amount, business, Commissioner, GST, GST ratio, income year, pay, provisional tax, revenue account property, taxable ac- tivity, taxable period, taxable supply, total taxable supplies Compare: 2004 No 35 s MB 18 Section RC 19(2): substituted, on 1 April 2008, by section 534 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Transitional years RC 20 Calculating residual income tax in transitional years (1) (2) (3) Calculation for transitional year This section applies for the purposes of section RC 5(2) and (3) and the calculation of a person’s residual income tax for a tax year if— (a) (b) the preceding tax year is a transitional year: the tax year before the preceding tax year is a transi- tional year.
Amount increased or decreased The amount of residual income tax for the transitional year must be increased or decreased by the amount calculated under subsection (3) to reﬂect the amount that would apply in a 12-month period.
Formula The amount of residual income tax is calculated using the for- mula— 2243 Part R s RC 21 Income Tax Act 2007 Reprinted as at 1 January 2010 (4) Deﬁnition of items in formula In the formula,— (a) residual income tax is a person’s residual income tax, as applicable— (i) (ii) for the preceding tax year, uplifted by 5%; or for the tax year before the preceding tax year, uplifted by 10%; or the amount estimated by them: (iii) days in current tax year is the number of days in the current tax year: days in transitional year is the number of days in the person’s transitional year.
(b) (c) Deﬁned in this Act: amount, residual income tax, tax year, transitional year Compare: 2004 No 35 s MB 19 RC 21 Paying provisional tax in transitional years Total amount payable A person liable to pay provisional tax in a transitional year must pay the sum of all instalments of provisional tax payable for the transitional year, both interim instalments under sub- section (2) and a ﬁnal instalment under subsection (3).
When instalments payable The person must pay an instalment other than a ﬁnal instalment on— (a) the 28th day of the months set out in schedule 3 part B (Payment of provisional tax and terminal tax) unless paragraph (b) or (c) applies: 15 January, when the month set out in schedule 3, part B is December and the year is a transitional year: 7 May, when the month set out in schedule 3, part B is April and the year is a transitional year.
(b) (c) When ﬁnal instalment payable The person must pay the ﬁnal instalment on— (a) the 28th day of the month following the ﬁnal month in the transitional year; or the 15th day of January, when November is the ﬁnal month; or (b) (1) (2) (3) 2244 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 21 (c) 7 May, when March is the ﬁnal month and the year is a transitional year.
(4) (5) Modiﬁcations to instalment dates For the purposes of subsection (2), provisional tax is not payable on— (a) the date of instalment B, if section RC 13 would have applied if the year were not a transitional year; or the dates of instalments B and D, if section RC 14(1)(a) and (b) would have applied if the year were not a tran- sitional year; or the dates of instalments B, D, and F, if the person li- able to pay provisional tax is a person with an initial provisional tax liability whose ﬁrst business day occurs within 30 days of the date of instalment F; or the date of instalment C, if section RC 14(1)(c) would have applied if the year were not a transitional year; or the dates of instalments C and F, if the person liable to pay provisional tax is a person with an initial provi- sional tax liability who pays GST on a 6-monthly basis whose ﬁrst business day occurs after the day that is 30 days before the date of instalment F. (b) (c) (d) (e) Counting months in transitional years In this section, and in sections RC 22 to RC 25, and in sched- ule 3, part B, the number of months in a transitional year is determined as follows: (a) the ﬁrst month in a person’s transitional year is the ﬁrst whole month in the transitional year: the ﬁnal month in a person’s transitional year is the month in which their new balance date under section 39 of the Tax Administration Act 1994 occurs: each month falling between the ﬁrst and ﬁnal months must be included in determining the length of the tran- sitional year.
(b) (c) Deﬁned in this Act: balance date, ﬁnal instalment, ﬁrst business day, GST, initial provisional tax liability, pay, provisional tax, transitional year, year Compare: 2004 No 35 s MB 20 Section RC 21(2)(a): substituted, on 1 April 2008, by section 535(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
2245 Part R s RC 22 Income Tax Act 2007 Reprinted as at 1 January 2010 Section RC 21(2)(b): substituted, on 1 April 2008, by section 535(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RC 21(2)(c): added, on 1 April 2008, by section 535(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section RC 21(3)(b): amended, on 1 April 2008, by section 535(2) of the Tax- ation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RC 21(3)(c): added, on 1 April 2008, by section 535(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
RC 22 Calculating instalments in transitional years: standard method When this section applies This section applies to a person liable to pay provisional tax using the standard method in relation to instalments of provi- sional tax payable in a transitional year under section RC 21.
Instalment other than ﬁnal instalment For an instalment date other than the date of the ﬁnal instal- ment, the person must pay an amount calculated using the for- mula— Deﬁnition of items in formula In the formula in subsection (2),— (a) (b) (c) (d) person’s provisional tax is the person’s provisional tax liability under section RC 5(2) or (3): instalments payable is the number of instalments that the person has in the transitional year on or before the instalment date: total instalments is whichever of the following ap- plies: (i) 3, for a person who pays on instalment dates B, D, and F; or 2, for a person who pays on instalment dates C and F: (ii) tax previously payable is the amount for the transi- tional year of the person’s provisional tax payable be- fore the instalment date.
(1) (2) (3) 2246 Reprinted as at 1 January 2010 Income Tax Act 2007 Part R s RC 23 (4) Final instalment For the ﬁnal instalment, the person must pay an amount calcu- lated using the formula— (5) Deﬁnition of items in formula In the formula in subsection (4),— (a) (b) (c) (d) person’s provisional tax is the person’s provisional tax liability under section RC 5(2) or (3): transitional year days is the number of days in the person’s transitional year: preceding year days is the number of days in the per- son’s preceding tax year: tax previously payable is the amount of provisional tax for a tax year calculated on the basis of the person’s transitional year that is payable before the instalment date.
Deﬁned in this Act: amount, instalment date, ﬁnal instalment, pay, provisional tax, tax year, transitional year Compare: 2004 No 35 s MB 21 RC 23 Calculating instalments in transitional years: estimation method (1) (2) When this section applies This section applies to a person liable to pay provisional tax using the estimation method in relation to instalments of pro- visional tax payable in a transitional year under section RC 21.